Product Selection

Consumers love selection.  If they are going to spend their time looking for something online, they have an expectation they will find it (seems simple right?).  How many times have you driven to 2+ stores on a weekend looking for a product to not find it.

Brick and mortar retailers are constrained by the physical shelf space which is extremely expensive and therefore has to hold 'top sellers' to achieve the necessary monetization rates to support that expensive retail space.  Online retailers move that physical aspect from an expensive store front to the substantially cheaper warehouse or distribution center (DC). 

 

Prerequisites


 

 

Strategy


 

80/20 Rule

Online retailers are able to offer orders of magnitude broader selection than brick and mortar retailers.  A very important concept called the long-tail, comes into play. There's an excellent book by Chris Anderson available here, that I always recommend everyone in e-commerce make sure they read. Chris also has a great blog you can follow as well here.  In a nutshell, this is a way of thinking about the 80/20 rule.  20% of your products will drive 80% of sales, but what about the other 80% of products?  With the offline model, you focus on the 20%, maybe even 15% because of the space constraint.  But online, with virtual inventory nearly costless, you can look at trying to approach 100% selection and thus address that last 80% long-tail products.  In many markets, the 80% long-tail is big enough to be a multi-billion dollar opportunity.

Even with the Internet model, selection can get expensive on the DC-side. For example, can you afford to have something in your warehouse  that you only sell one of a day?  a week?  a month? a year?  As you go down the long-tail, the volume decreases and thus inventory 'turns' decrease along with selection and inventory costs and locked-up cash go up. 

Selection

When discussing selection, most retailers think about the products you are offering, or SKUs which can include a variety of sizes, colors and other attributes (styles).  But it's important to note that selection can also mean different conditions (new, used, refurb) or even pricing models (auction, fixed price, negotiate/offer, mark-down).  In today's world, consumers want options and that means not only product options, but 'purchasing options' as well.

For some products, 'delivery method' can also be part of selection.  For example, is the software/music/book/movie available via shipping, or download?


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