Assortment Planning: Hypermarket vs. "boutique"

Today I decided to publish one of the chapters of the book “ Your online store from A to Z ”, which I wrote, based on my experience in the field of eCommerce, the popularity of various topics of my articles, reports or interviews, as well as questions asked listeners and readers.

This book contains everything related to the work of an online store. From its creation and selection of its niche to the promotion, development and work with clients. The book has many examples and tips based on practice, as well as a set of classic mistakes online store.

Anyone who is interested in the topic of assortment planning, please under the cat.
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The full version of the book "Your online store from A to Z" is available here.

“Too much choice can lead us to the point that we don’t choose anything at all” (Sheena Iyengar, Professor at Columbia Business School, The Art of Choice book)

Usually, start-up entrepreneurs are tempted to immediately make a “hypermarket” - a store where, relatively speaking, there is everything. After all, virtual shelves seem limitless. The opposite of the "hypermarket" - "boutique" or a highly specialized store with a small but very cool assortment.

Even if, according to your concept, you are building a hypermarket, I would not single-handedly try to reach all the audiences your product matrix is ​​targeting. I would go gradually, carefully processing each group of goods or categories.

Agree, it is better when you can qualitatively serve the attracted audience for well-developed product categories, including accessories, which you can often earn more and make the client happier than you cannot serve anyone at a decent level. I have many examples when shopkeepers, trying to grasp the immensity in one fell swoop, instead of increasing, lost their income.

Somehow I was told a story about buying a dog grooming online store. The client, without understanding the question at all, called the store and, after a brief consultation, ordered the model recommended by the consultant.

The courier arrived on time, was courteous and polite. No questions gave change and thanked for the purchase. When the packaging was opened, and the satisfied customer was anticipating a haircut of his shaggy pet, it turned out that for the full functioning of the device a nozzle is needed, which ... must be purchased separately and is not included in the kit.

Imagine the depth of frustration from buying. Indeed, at this particular moment, it is completely useless. Money is wasted, because it is absolutely impossible to cut a dog with this.

Do you think this customer bought a nozzle in the same online store? The answer is obvious: of course not. And will he go there again on occasion? Hardly. The details of the incident are likely to be forgotten, but the association of a particular store with the emotions that the customer has experienced will remain for a long time.

Or here's another example of trying to grasp the immense. Gourmet online store selling tea and coffee, dishes, tea and coffee sets, various exotic sauces and condiments, chocolate, sweets and other sweets, decides to add inexpensive Chinese fans to the range.

The hot season was approaching, and this decision seemed quite logical to the company's management. In addition, along with expensive, one might say, elite tea, the site was presented the usual packaged, sold in any supermarket.

When I asked why Chinese fans need a gourmet boutique, I received the answer: “So they are asked!” And why cheap tea? “Because the supplier has one, and we still go to him often anyway!”

Management did not really care about what impression the target audience could make about the store. By selling products that are not typical for your project that do not fit into your concept, you may please the one who is looking for this particular product, and he doesn’t care where to buy, but at the same time you risk losing those who came to you, as you chose just you!

If you have formulated the concept of business, if you understand your niche or several niches, then you should already be well aware of your target audience and its needs. Do not try to move away from your concept, even if you find a very interesting product that is not suitable for you.

It happens that in such cases, entrepreneurs create a new project “on their knees” just for the sake of selling a product that does not fit into the concept of the main business. And it even happens that such a “temporary” project is superior in efficiency to the main one. This is exactly what happened at the time with the digitalshop.ru project, created beyond the framework, but based on the core business.

So, what is the way to go - “boutique” or “hypermarket”

If the “boutique” is a narrow niche, then the “hypermarket” is just a lot of niches, many target audiences. Looking at the assortment in this vein, we begin to see more. And we understand that in the case of a hypermarket, we will need to work with a huge number of different audiences. For each of them you need to formulate different proposals, you will need to make different advertising. This is a kind of "several boutiques" on one site.

At one time, the management of the Boffo book boutique went the same way. Were added completely different thematic sections of boutiques, targeted at different target audiences. It was assumed that there will be numerous intersections of audiences, and people will begin to buy goods from neighboring "boutiques", even if they came for just one book.

Unfortunately, the strength for a serious study of all the niches was not enough. Instead, it was just taken the range of suppliers with whom we managed to agree, and sent to the site. As a result, after a short period of such activity, almost all available resources were spent, and a huge amount of unclaimed goods accumulated in the warehouse.

The hope of expanding the demand of regular customers for new categories has not been justified. Quite the contrary. Some of the loyal customers before were extremely negative because of the fact that shirts and tea are now sold in their favorite bookstore. And they actively stated it publicly.

After the global processing of the company's product range, based on the intended tasks and preferences of the target audience, the share of orders from regular customers has doubled. And this is without prejudice to the growth of new customers! In 2015, despite the crisis, the company grew by almost 100% from month to month. This result was achieved almost only thanks to the competent construction of the range.


Presentation of the book at the “15th meeting of eCommerce Case Club” in Yandex (February 8, 2017)

If you have selected several niches for yourself, sort them by priority and launch time. Completely “spud” one niche and only then take on another. Of course, if you have enough "hands", then you can master several directions simultaneously. If resources are limited, take your time. Road going by walking. "Eat an elephant" in portions.

In general, when there is a conversation about hypermarkets, for some reason, Amazon.com is always remembered. But no one really delves into his story, except the memories that they began with the sale of books. But why books? It's simple.

When Amazon was launched, nothing really could be bought on the Web at all. And the Internet audience was advanced techies, programmers and people involved in science, working in institutes and universities. They were the ones who had access to computers and the Internet. It was for them that this service was launched.

The project solved the problems of its audience: save time on finding and getting the right book, while buying it at a good price. Successfully “spilling” your audience and teaching them to buy it here, Amazon began to develop a product matrix. And only after a long time it became a hypermarket.

Do you think they thoughtlessly added products to the site, trying to satisfy everyone? By no means. Each niche is a serious work that includes not only the selection of popular products, but also the study of the needs of the target audience in order to offer it what is needed.

And it does not necessarily be the statistically most popular products. Only many years later, Amazon became the wide-scale project offering to host offers of third-party companies, which is now.

The ideal example of work for its audience is the restaurant business. You will never find a coffee shop, fast food and an expensive restaurant at the same time. And if they find it, it is unlikely to be successful. Each institution works for a specific audience. And if everything is done correctly, if the audience reciprocates, then this restaurant is amazingly successful.

Search the web for recording the TV program "On the Knives." In almost every program, concept and management problems emerge. And as soon as you manage to “pack” everything, the business immediately begins to go up the hill. The main thing is to remember that you are doing business, and not just your favorite business.

Continuing the niche topic, it is impossible not to discuss the issue of domestic commodity competition. It is quite normal when different products compete with each other, because not only we - the sellers are fighting for the customer, but also the manufacturer is interested that his products buy better and more.

It is not always easy to choose a customer, as the difference is not obvious. And the functionality and benefits declared in promotional materials or descriptions on the site cannot always be directly compared. Most often it is just the opposite.

Manufacturers "rebuild" from each other, broadcasting various benefits for similar products. As a result, it may happen that the customer leaves the store without stopping at any of the options. He still has a need, so perhaps he will go to another outlet, where with the assortment is “simpler” - or the difference is explained more clearly.

Recently, I went to a fairly popular sports shop to buy skates. The range was simply huge, but, praise to the marketers of this company, each model was equipped with simple and understandable characteristics: "convenience", "security", there was also a rating: "beginner", "average level", "professional".

As a result, the widest range has ceased to be a burden. It has decayed into target audiences, has become transparent, since it has become much easier to choose products that are almost the same in appearance, differing, it would seem, only by value.

Of course, there are exceptions. For example, when producers are actively advertising. In this case, it is logical to offer the client to choose which brand he trusts more, but the presence in this case of someone third, fourth, fifth may be an additional barrier for the buyer.

This is especially noticeable in electronics hypermarkets, where a huge amount of equipment is presented, and a consultant who, in theory, should help with a choice, cannot be fed. And if he succeeds in catching him, at best he will say something like: “This one is excellent, they buy it well”. Of course, they buy, if everyone recommends it, especially when they give a premium for its sales.

But then another story pops up - merchandising, that is, the science of placing goods on the shelves or in the sales area. One brand may be deliberately presented in a more favorable light than another. For example, a coffee machine can act, you can use it and drink coffee without departing from the counter.

This product immediately gains an advantage over the other, packed in a box and standing on the shelf below. If you think that merchandising is only for offline, you are mistaken. I will discuss this in more detail in the chapter on the formation of the directory structure.
So. Now you know exactly what you will build. Gathered with strength and are ready to find all this resources.

"Tweaking"

It's great if you know the market well. Which products are more popular, which - not very. Where there is high competition, where else you can earn on “bread with butter and caviar”, and where you have to fight for every penny of margin.

If not, you should use a tool that is not created for this. The popularity and analysis of demand for products, categories and brands can be assessed using the keyword selection service for contextual advertising - Wordstat from Yandex.

This service shows the statistics of requests on Yandex, including the word or phrase you specified, per month. For example, by typing the phrase “acoustic systems” in this service, you will know how many people are looking for something in this or that context with this phrase. Along with this you will see popular combinations.

Using the names of brands together with their main categories, you can compare their relevance to the Runet audience. It is also possible to track trends - the increase or decrease in demand for specific groups of products or brands.

This is a very powerful tool, if you do not forget four important things.

1. Seasonality

Any product has seasonality in demand. More or less, but there is. Wordstat can show query history. On it it is possible to estimate whether there is a pronounced seasonality of demand.
Here is an example. Mulled wine is really not interested in the summer. But autumn-winter - the most it.

2. The same can be called differently.

Many categories of products may be named differently. There are common words, there is slang, there are synonyms. Before analyzing specific categories, try to find out the most common variants of their names that people use when searching the web. Let me remind you that this can also help in correctly naming categories on the site.

3. Formed demand is not a guarantee of successful sales.

If you notice that a product under one brand is much more popular than another, do not rush to conclusions. Perhaps all of your competitors are selling this product, and it will be very difficult to try to grab a piece of cake on a very tight market. This has yet to be found out with the help of other tools.

4. If there is no formed demand, this does not mean that this product cannot be sold.

If it turned out that almost no one is looking for the goods for which you were going to trade, do not despair. Yes, it is easier technically to sell products with the help of advertising tools targeted at ready-made buyers, but if your product has potential, then you have the opportunity to "skim the cream" by investing a little in its promotion.

This is not easy, but it gives a greater benefit compared to entering the already “piled up” market. True, be prepared for the fact that a line of you will immediately line up wishing to sell the same product, parasitizing on your investment in its advertising.

Now you can assess the level of competition. To do this, we use another tool of Yandex. To start, go to the search and type the key phrase we need. For example, b & w headphones:



On the right we see the link "Show all". Now we will be able to see all the ads placed in the Yandex contextual advertising system. Direct. Actually, this parameter can show you an approximate level of competition:



Just keep in mind that this list may contain ads of illiterate advertisers, placed on the word "headphones" without specifying the brand.

Now you not only know how high the competition is, but also see all of your potential competitors. Having built two parameters - demand and competition - in two lines in Excel, you can calculate the ratio of your interest in certain brands or categories. And if you add a potential margin here, you’ll get some very interesting data. For example, you can do it all again, but adding the word "buy."

What factors can still be studied and how to experiment with numbers, I will not tell, because here everything is limited only by your imagination and available data. I will give only one piece of advice: indirectly, at the rates for advertising by keyword in the same contextual service “Yandex Direct”, you can compare the complexity and cost of attracting a client.

And considering the cost of the transition and the average conversion of a visitor into a buyer in the consumer market (1%), it is possible to evaluate the profitability at all. True, I repeat, this is all conditional. After all, a huge number of variables are not taken into account. But this way you can accurately compare different categories and brands for their “goodies” for the future business. Next is to read the opinions of customers about the brand or product on the web. They are easy to find if you add the word "reviews" to the name. And think over almost the most important thing (yes, yes!) - accessories.

And last but not least - locomotive goods. Those that may not earn you a lot, but they will, like locomotives, pull customers along. Even if customers purchase these goods, which may not be so interesting, your task is to make sure that something else is sold to them. And do not forget to work with the client after purchase!

PS I think that in the coming days I will continue to share with you the chapters from my book, but for those who would like to read everything at once, this link to the thematic website of the book is useful. At the moment, you can buy both the electronic version and the printed version - in paperback and hardcover.