Managing Your Assortment & The Case for Item Expansion
Do More Items = More Sales?
*Publishers Note: This is the first in a three part series on how to grow your assortment. 1) Growth through line and brand extensions, 2) Growth through hero items and 3) Actual case studies of these strategies in action.
Introduction
One of the biggest challenges that a seller will have is determining how to manage their assortment. Do they try and drive further growth from existing items or do they see more growth from new items?
I want to focus on the second part of that sentence and help you determine how you should think about laughing new products. There are two schools of thought around new product development…
Capture the Long Tail: Launch a high number of items with the idea that most will not be huge drivers, but the the cumulative impact across all SKUs will be material.
Fewer, Bigger, Bolder: Align your strategy around a few big launches that will make or break your year.
This post will focus on helping you to understanding how the Long Tail strategy can work for you and how to operationalize the strategy.
After much deliberation you have finally come to the decision to grow your brand by expanding the assortment. Now that you know you want to grow your assortment - here comes the hard part of putting together a plan.
The first step is figuring out how to plan your assortment — do you want to try to expand within your current category and expand your offers around a top seller, or sell across a number of categories? Is this item an anchor item or an add on? How will you drive traffic to the new listings and can you bundle new and existing items to boost your AOV?
Answering these questions is key to driving success for your brand, and in the next few sections I’ll walk you through how to do it.
Planning Your Assortment
Line Extensions: New Versions of Your Top Items
Once you commit to an assortment expansion strategy, your planning comes down to a simple choice…Am I better off by adding new versions of my best items (line extensions) or will I be better serviced by launching new items across many related categories?
If you already have a strong presence within a category where non-functional attributes (things like size, flavor, color, etc.) drive purchase behavior, you should strongly consider a line extension strategy. Common examples of this strategy are new flavors of a protein powder or new colors of a popular phone case.
Simple Modern, the top drink-ware brand on Amazon leverages this strategy really well1 — they continually expand within the drink-ware category with a focus on bottle shape and color. This has DRASTICALLY expanded their digital footprint, provides customers with more choice2 and leverages the strength of their legacy items via variations on the detail page (we’ll cover this in a forthcoming section).
Benefits of a Line Extension Strategy
Increasing your presence within a category can give you more perceived credibility with in-market customers.
Closely related items (i.e. color extensions of a mug) will give you more coverage within the search results3, making it easier to drive clicks.
Line extensions are a more cost effective strategy than expanding the brand into new categories. You can leverage your expertise, raw materials molds, etc. and aren’t starting from scratch.
Less risky strategy — you already know there is customer demand for the item and should understand the market so you should have a higher probability of success.
Challenges of a Line Extension Strategy
You aren’t increasing your addressable market and will be looking at incremental growth versus explosive growth in a new category.
There will be cannibalization of your current business. Customers who would have bought the black cup may now buy the blue mu — this means that the $100 of sales in your new items may only generate $70 of growth
Limited opportunity to basket build. Since the items are substitutes, customers will either buy the existing item or the new item but not both.
Brand Extensions: New Items in New Categories
The other method growing your assortment is a brand extension strategy — this is where you will launch items in adjacent categories that can best serve your customers.
One of the key aspects of a brand extension strategy is to enter categories where you have existing credibility — if you sell headphones you probably have customer permission to sell bluetooth speakers, but T-Shirts….probably not. What you need to look for are categories that complement your existing assortment. If you sell collagen power you may look to add a multivitamin or fish oil. Something that is in same general market as your core assortment but not a direct replacement. CPG companies like Dove use this strategy all the time — all of their items are loosely within health & household, but all serve a different niche.
Tip: Finding compliments (add-ons) to your existing assortment (anchors) needs to be a key part of your merchandising strategy to drive higher average over values.
Benefits of a Brand Extension Strategy
By entering new categories you are expanding your total addressable market & universe of potential customers giving your brand more chances to grow. (need help researching categories? use Jungle Scout)
Launching complimentary items gives you the ability to bundle items together, leading to a higher AOV and more profit per order.
Establishes you business as a brand vs. a product — Goli and Ridge both started as individual products that by entering new categories established themselves as true brands meaning that they can continue to go into new related categories.
Challenges of a Brand Extension Strategy
It can be challenging for brands to gain credibility in a new category and change their perception. Whenever you see Jason Alexander on TV, don’t you ask what George Constanza is doing on this show? Same effect with your brand.
If you brand does not have a strong message and point of view, entering new categories cause customer confusion and give your brand a loss of reliability and focus.
It is hard to generate demand in new categories and you will need resources and patience to ensure that items start to sell at the rate you want.
The best part of expanding your assortment is that it doesn’t need to be a this or that choice — you can do both. Let’s look at a real life example with Goli, they started with an Apple Cider Vinegar Gummy and quickly expanded (via line extension) into other gummy items including Supergreen’s, Ashwagandha, Sleep, and Superfruits Beauty. They also launched a brand extension strategy by going into categories with condition specific bites. By engaging in both strategies, not only is Goli maximizing their best items, but they are continuing to expand their total market.
Driving Traffic and Cross-Sells to Your New Items
Launching new items is only part of the equation, you also need to find ways of driving traffic and merchandise your new items. Below are a few less obvious examples:
Product Variants
Adding new items as variants to existing items is a proven way to drive traffic to new listings. Below is an example from Sweet Water Decor, a candle brand that has had success with this strategy.
Not only do all of these items benefit from traffic to any of the child listings on the page, but each one of the variants is tied to the same parent ASIN. Why does this matter? When Amazon is calculating BSR for a category the do it at the parent ASIN level meaning that all of the units sold for any of the variants count towards the total for the parent ASINs total.
Picking the Right Categories to Win Through Organic Traffic
Categorizing your item on Amazon might seem like a throw away exercise but can have a dramatic impact on the success of a new item. There are two main reasons why you want of focus on choosing the right category:
The smaller the category, (generally) the less competition: You want to be in as granular of a category as possible: If you are selling a heart health supplement, having your item in Antioxidants is good, but having your item classified within Pycnogenol is much better. While the keyword volume for these smaller categories might be low, they are easier to rank within and provide an opportunity to quickly shoot up the BSR charts
Not only can miscategorizing your item lead to increased competition, but it can cost you sales by limiting exposure in search results. Simply put, if you put your item in the wrong category, it can be totally ignored by Amazon’s search algorithm. Let’s compare the search results for the same term within two different cateogires…the first will look at how many results are pulled back for the term probiotics within Health & Household: more than 10K results!
Now let’s assume you made a mistake and categorized the item within the Handmade category. The results are drastically different — while there were ?10K within health & household, there were less than 40 within handmade.
Display Ads on Your PDPs
This is a controversial strategy, but I strongly support advertising on your own product detail pages when launching a new item. This strategy is most applicable for the brand extension approach where you are promoting complimentary items in new categories. Here is a great example from Anker where they are leveraging two separate ad modules to promote a new launch (Anker Work) and a related ASIN.
The typical pushback for this strategy is “why would I want to take customers off of my detail page?” Well…
By being on your detail page, the user has already shown interest in the brand — there is no better target customer for a new item from your brand than someone already interested in your brand.
These should be complimentary items, not substitutes, and as such you shouldn’t see much abandonment and have a chance of cross-selling customers and building a higher average order value.
Someone is going to advertise within those spots, might as well play defense and protect yourself from conquesting campaigns.
Product Bundling with Virtual Bundles
Virtual bundles are a tool available to FBA sellers where they can combine 2-5 separate ASINs together to be sold for a single price. Bundling is a great way to increase AOV, train customers on how your products work together, and provide a value price to customer without resorting to strike through style discounts. Amazon’s Virtual Bundles have some unique benefit for new items including…
Additional exposures on related PDPs: When an ASIN is a part of a virtual bundle, you are able to leverage the popularity of your hero items to show the new items within your assortment. Not only will the items be shown together in virtual bundle page, but the bundle will be merchandised on the component product pages as well.
Test Bundles Before you Physically Develop Them: With virtual bundles there are no restrictions on how many combinations of bundles you can create. Beaus of this you can quickly understand customer response to your assortment and be flexible enough to report to ever changing customer preferences.
Leveraging Your Brand Store
Brand stores are often a forgotten resource when launching new items. As mentioned above, the best target customer for your new items are current customer of your brand.
By merchandising new items within your Brand Store you are able to leverage the traffic that your existing ASINs drive to the store while cross selling and driving a higher average basket. Below is an example from how to do this in practice from Yo Mama’s Food Co — the page does a great job of showing multiple items through distinct pieces of creative, has a taxonomic structure that shows the major categories that encourages customers to cross-shop!
Conclusion
Pursuing an expanded assortment is a great low-risk4 way of driving long-term growth for the brand, but remember the work doesn't stop with the launch of the item!
Most importantly - check your inbox for post 2 of 3 int his series coming your way soon!
Simple Modern tried the category expansion strategy by moving into backpack with tepid results.
It’s generally accepted that customers appreciation of the option of choice, but that isn’t always the case. What customers really want is to be more confident in the choices they make.
This is extremely common in brick & mortar retail; the more facings a product has the more times a customer will see it throughout their shopping experience.
Low risk does NOT mean no risk.