Product catalog in eCommerce: Large or small?

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Defining the breadth of the product catalog in eCommerce is one of the challenges one faces when opening a online store . The option of the greater or lesser quantity of products in an eCommerce catalog is not a minor issue. This will depend on many aspects of the configuration of the home of our website or marketing policy in addition to the different amount of work involved in maintaining one option or another.

At first glance, logic dictates that The more variety in our eCommerce product catalog, the more sales opportunities will be. Since we do not have the space limitations that a physical store has, why not have a very large catalog?

Let's look at the pros and cons of each of the two options.

Catalog of products in large eCommerce

Arguments in favor of a wide catalog

1. The greater variety of products multiplies the possibilities of sale. [19659010] It allows to segment much better our offer to reach customer profiles ( targets ) different from the same eCommerce store.
2. Help us with the SEO ] (if we work it well) since multiplies the keywords in which we can position ourselves, in a 'long tail' strategy
3. It allows to negotiate better shipping prices per unit with the logistics operators, since the volume of shipments will be Major.
4. Diversify the risk. The greater the breadth of the eCommerce product catalog, the greater the chances that one or many of them will be a sales success.
5. It allows a greater rotation of products and the continuous presentation of novelties. [19659015] Arguments against of a comprehensive catalog
   1. Substantially increases costs as it requires more time for maintenance and updating
   2. Complicates logistics significantly ] both in relation to the suppliers (we will probably have many) and in the preparation and delivery to the customers.
   3. It greatly increases the space requirements for the storage and handling of the products (which tell Amazon)
   4. Requires more effort e investment in marketing.
   5. Increases complexity of financial management . A very large catalog of products in eCommerce implies greater administrative tasks, higher bank management costs and more personnel requirements.
   6. Complicates the homepage. It is very easy for the client to leave if he does not find what he is looking for easily, which requires having advanced product search tools.

   Small eCommece product catalog

   Arguments in favor of a small catalog

   1. It is easier to handle and the administrative and logistical costs are lower.
   2. Requires less physical space for storage and handling.
   3. It allows to focus marketing efforts on a small number of products, maximizing the results of the advertising investment.
   4. It simplifies the design of the web home much. The customer quickly accesses what he is looking for.
   5. Presents a more specialized image . Increase the degree of knowledge of each product and simplify customer service. In addition, it allows to focus much better on the needs of a specific target, which will feel more identified with our online store.
   6. Improves costs with suppliers, since when concentrating the volume of sales in a few products allows to negotiate better prices.

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   Arguments against from a small catalog

   1. Increases risks since we handle a smaller number of products. This forces us to be very sure of what we are selling and to perform better market studies.
   2. Reduces the number of potential customers by focusing on smaller targets. Therefore, it is necessary to increase the marketing effort to reach those targets.
   3. It makes you a lot more dependent on a few suppliers and they, do not doubt it, know it.
   4. Complicates the management of promotions and offers to have less diversity in the margins.
   5. It makes you more vulnerable to competition especially if you do not manufacture or add value to the product.

   ] So, what's better? A large or small product catalog?

   Contrary to what may seem, the breadth of your eCommerce product catalog is not an issue (at least not primarily) of investment capacity or size of your business.

   I'll give you an example: Apple and Samsung . The product catalog of Apple is very small: in both phone models, iPad, Mac and the complementary services they entail. And it is the largest company in the world by market capitalization, to which no one overshadows at the moment.

   Samsung, for its part, (if we ignore that it is an industrial conglomerate that manufactures from televisions to washing machines, going through excavators) has a huge catalog of phones, tablets … Both have triumphed in the field of smartphones, but Apple more than Samsung. It is a strategic issue .

   The breadth of the product catalog in eCommerce is not a matter that is decided a priori. First one defines its strategy from a few star products that it trusts and then increases (or not) its product offer based on its strategic objectives.

   In any case, we always have than having a classification of the products we offer. In this sense, the old matrix of the Boston Consulting Group (dates from 1968) remains fully in force: This matrix of growth-participation in the market helps a lot to clarify things and to put order in our catalog. It does not classify the products we sell, neither by cost nor by margin, but by two external factors: the market growth rate for that particular product and the relative share of that product in the total market, that is, its penetration rate.

   Thus, the products are classified into four categories:

   • Incognita : Products, normally newly launched to the market, that have a low penetration rate but a high growth potential, and that require a large investment in marketing to make that penetration increase. In this phase it is difficult for a product to give benefits.
   • Stars: Products with a high penetration rate in the market and with a great potential for growth. They can give benefits, but being in a rapidly growing market requires high marketing investments. They are products that sell a lot, but they need a lot of investment to grow and sell more, so their margins are reduced.
   • Cows : Basically it is what almost all companies live . They are products with a high penetration rate in the market, although the possibilities of growth are low. These are consolidated products that require little marketing effort to maintain themselves and have quite high margins.
   • Dogs : These are products, usually at the end of their life cycle, that have low penetration rates in the market and also have no possibility of growth (usually decrease). Nor do they usually give benefits and it is normal to extinguish them. If you wonder why the BCG Americans decided to call these products "dog" (especially if you have a dog, I doubt you want it to be extinct), I also wonder.

   Companies live by milking the cows ] There, from this analysis of our product portfolio, it will be a good clue to the breadth that our catalog of products in eCommerce should have. We can not have many products incognito, because we will be ruined. Not many stars, because the profitability will be very low. We have to have many cows and few dogs.

   The question is: How many cows do I need to keep my entire fixed cost structure and make money? There's the quid of the question. If your cows have a very low cost and are sold for reduced unit prices, you will have to have a wide catalog to have many.

   Apple does not need to have many cows because theirs, the iPhone, makes them earn money at flow. It is a product with a huge margin and a high price. Although in the case of the apple brand, it is not easy to define whether the iPhone is a star or a cow. Rather it is right in the middle. This matrix also defines a key factor: the life cycle of each product. All the products start being unknowns. Of those, some are first stars and then cows to end up in dogs.

   But no product is going to be a dairy cow forever . That is why we must risk incorporating new unknowns that start a new life cycle and can become cows. After mounting this farm, I hope you have it a little clearer. The conclusion is that to make a decision about what your eCommerce product catalog should be you have to do many numbers, have a strategy and constantly review based on results.

   But you already knew this. I hope so.

   Images: Shutterstock and DepositPhotos

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from Nettech Post http://bit.ly/2FnzPRb