When an office supplies chain found that in-store sales were lagging, a series of strategic decisions were made to improve the top and bottom line by shifting emphasis to online sales. These changes would allow the company to close numerous stores, and in those that remained, move to a showroom approach where products would be displayed but inventory for all items would not necessarily be kept in stock. The majority of items, whether purchased online or in-store, would be drop-shipped. Referred to as the “endless aisle,” this approach would allow for a much higher potential sales volume at lower cost.
In addition, the company planned to expand from its focus on office supplies to providing a much broader product assortment in several key small business B2B verticals, including education, healthcare, restaurant and retail stores. The company’s online marketplace strategy was designed to significantly increase Average Order Value (AOV) without additional inventory costs, but also entailed managing a very large number of new products and associated SKUs from multiple new third party vendors.
Inadequate Framework Strains Under Weight of Expansion
Initially, the company more than doubled its 100,000 office supplies to about 250,000 products, and the plan was to go to 2 million within 18 months. When it neared 500K SKUs to introduce “Shop by Industry,” however, problems arose with structuring and managing the product categories. Over 50 major categories were in place, and over half of those had fewer than 50 SKUs. Editorial “drift” away from core office supplies meant that the categories were no longer well defined. And the number and variety of product information attributes had skyrocketed with the dozens of new vendor data feeds introduced for verticals.
At that point, the company recognized there was no way to support this aggressive growth without redesigning their product taxonomy and requested assistance from Earley Information Science (EIS). The first step was to make decisions about where product categories should be combined, removed, or redefined. The second major issue was how to re-merchandise the new breadth and depth of product assortment so it would make sense to each B2B vertical, without listing many thousands of items multiple times.
- EIS analyzed the categories and identified many areas of inefficiency, ambiguity and redundancy.
- After discussions with the company, the number of major categories (“super-categories”) was reduced by about half, and the number of subcategories (“classes”) by about the same amount. These changes improved the shopper experience and allowed faster online access to product pages, while simplifying the process of item onboarding from vendor product data feeds.
- Shop by Industry digital merchandising categories were then “layered on” to this simplified structure so that shoppers and B2B customers could easily navigate to just the right assortment of products, whether just office supplies or a vertical was self-selected.
The last major challenge was to rationalize the hundreds of conflicting, overlapping product attribute definitions to ensure consistency. This required analysis and redesign of attributes (product features such as brand, color, size, and material) across and within each specific product category. In some cases, SKUs from different vendors within the same subcategory had 150+ variations of product attributes, which made accurate navigation filtering nearly impossible for shoppers. Our attribute redesign reached the goal of reducing attribute complexity while improving data quality, allowing customers to zero in on relevant products from among millions of SKUs in just two or three clicks.
From Lagging Sales to Online Profitability
Product taxonomy redesign has been essential to bringing endless aisle and online marketplace strategy to fruition for this major office supplies chain. In addition to enabling 8X growth in online assortment, the company’s digital merchandising teams now have a blueprint that allows for better curated product assortments and less time maintaining individual item assignments. Fewer clicks to product have meant greater online conversion. And after the modifications made by EIS, specialty Shop by Industry collections have helped make this retailers online marketplace strategy a success, achieving more than $200 million of growth beyond office supplies. Overall, changes have supported double-digit growth in online sales, making the flagship website their most profitable business.
Moving from in-store emphasis to one that is primarily online through endless aisle drop-ship is only one of several legitimate retail strategies, and each approach points toward a different information architecture. For example, another EIS client, a big box home improvement supplier, uses the online experience to encourage in-store visits, which the retailer hopes will drive additional sales based on service differentiators and visibility of related in-store products. In this strategy, digital merchandising and promotional techniques are different from those used when the online approach is primary.
“Unified shoppability” mandates being able to find and research products and services easily and consistently regardless of final purchase point, as consumers today move among social, in-store, kiosk, online and mobile throughout their shopping journey.