Successful with the right assortment strategy

Changing assortment strategy

The fact that geopolitical changes have a major influence on purchasing behavior and e-commerce has been clearly demonstrated since the Covid-19 pandemic. War, inflation and reluctant shoppers are now turning “growth at any cost” into “profitability at any cost”. So how do I get the most out of my limited resources?

The most important KPIs

In order to be able to compare different products with each other, there are now many key performance indicators that are suggested to you. For a successful assortment strategy, in addition to classic KPIs such as product price, CPC per product and conversion rate per product, those that represent a cost / success relationship at product level are particularly interesting:

• ROAS per product
• Margin % / € per product
• CPA / CAC (Customer Acquisition Cost), caution with different product prices
• CPC / AOV ratio, important to consider conversion rate

Where are the optimization opportunities?

Especially in advertising on marketplaces, there are many optimization opportunities here, in addition to the adjustment of click prices and advertising texts, also the selection of advertised products and the strategy behind it.

To be successful on marketplaces in the long term, it helps to take a step back and evaluate your own product range:

Which products are my best sellers?

As a rule, 20% of the products are responsible for 80% of the sales. Special attention should be paid to these products in the advertising strategy, as changes here can have the greatest impact. It makes sense to either push these products strongly as growth products or to advertise them profitably as skimming products. If bestsellers are not promoted, potential is often wasted.

Which products are growth drivers?

Growth products are products that meet demand very well and grow disproportionately. Advertising budgets should be invested here to accelerate this growth even further.

Which products are low-performers?

Low performers have a low ROAS or a high ACoS and cannot justify the advertising spend used. The key here is to understand why this is the case. Are content / customer reviews poor? Which products work well in the category and what is done better there? Do advertised keywords not match user intent? Low performers should either be improved or excluded from ad campaigns to improve overall performance.

Strategy approaches in the most important situations

We analyzed different situations that are crucial for a successful assortment strategy and came to the following conclusions:

1. Similar products: For example, if there are two gray desks in the assortment, but one of them has a significantly higher demand, once the conversion rate is over 2.5x, you should put a focus on this one.
2. Different marketplaces: If the same product is specified on different marketplaces, care should be taken to ensure that only the product at the significantly lower price is offered during discount promotions. On other marketplaces,you can then pause the product or only give it a low CPC.
3. Market environment: If you can see on a marketplace that top sellers and similar products are rather cheap, you should also promote rather cheap products in the assortment in a focused manner.
4. Channels: You should use the online storefor branding. The focus should be on a meaningful, representative assortment, which can also be higher priced. In the case of the marketplaces, the respective strengths of the channels should be used above all. Zalando is suitable for seasonal goods on a fashion marketplace. Amazon is a great place to sell NOS (never out of stock) merchandise. In addition, the goal here can be to build a long-term strategy to become category leaders with individual products. At Limango, it is very good to sell remaining stock, in-stock merchandise and out-of-season products.
5. Times: Promotional periods such as Black Friday, Cyber Monday or Prime Day are important for reducing inventory, but you should pay attention to the margins here. In addition, you need to pay attention to seasonalities of products. Furthermore, it is advantageous to promote gifts at Christmas time and to include the word “gift” in the content. Finally, vacations, weekends and public holidays should also be taken into account, because depending on the product, these can increase or decrease sales.
6. Competition: If your own products have little assortment, it may make sense to exclude them from the promotion. However, if competitor products have hardly any assortment, it may make sense to attack more in order to gain market share, or to advertise less, since you can achieve more organically.

Conclusion

To start promoting your assortment in a targeted and successful way, you should ask yourself the following questions:

• Which products are focus products? (usually 20% of the products make 80% of the sales)
• Where is the customer’s target group located? (in case of multiple sales channels)
• What is the competition doing?
• How large is the inventory?
• What is the general strategy? Which products should be brought to the front?
• What’s going organic vs. paid?

Once all of that is clear, you can optimize your strategy and increase sales.