For eCommerce sellers, having a high SKU (stock keeping unit) count, or a large number of products available for sale, can be both a strategic advantage and a logistical challenge. On the one hand, a wide range of products can attract more customers and increase the chances of making a sale. On the other hand, managing and promoting a large inventory can be complex and resource-intensive. In this article, we will take a closer look at the pros and cons of having a high SKU count for eCommerce sellers, and provide insights on how to navigate the trade-offs to make informed decisions.
- Increased revenue potential: A larger selection of products can lead to more sales and higher revenue, as it allows sellers to appeal to a wider range of customers and meet more of their needs. For instance, a D2C eCommerce business with a high SKU count can offer a wider range of sizes, colors, and styles to suit the preferences of different customers. This can also lead to increased customer loyalty, as customers are more likely to find exactly what they are looking for and return to the seller for future purchases.
- Greater customization options: In addition to offering a wide range of products, a high SKU count can also allow sellers to offer greater customization options to their customers. For example, a clothing retailer could offer a range of sizes, colors, and styles, as well as the option to personalize certain products with custom prints or embroidery. This can help differentiate the seller from competitors and provide customers with a more personalized shopping experience.
- Improved search engine rankings: Having a large number of products can also help improve a seller's search engine rankings, as it can increase the likelihood of their products appearing in search results for a wide range of keywords. This can drive more traffic to the seller's website and potentially increase sales.
- Increased customer satisfaction: By offering a wide range of products and customization options, sellers can improve the overall customer experience and increase satisfaction. Customers who are able to find what they are looking for and have their specific needs met are more likely to be satisfied with their purchase and return to the seller in the future.
- Increased brand authority: Offering a wide range of products can also help sellers establish themselves as experts in their field and increase their brand's authority. For example, a seller who offers a large selection of products related to a particular hobby or interest may be perceived as a go-to source for information and products within that niche.
- Increased operational complexity: Managing a high SKU count can be more complex and time-consuming. It can require more resources to accurately forecast demand, manage inventory, and handle shipping and fulfillment. This can lead to higher operating costs and lower profitability. From a 3PL's perspective, you lose efficiency and it takes up a bigger footprint in the warehouse.
- Higher overhead costs: A larger inventory can also lead to higher overhead costs, such as the need for additional storage space and packaging materials. These costs can cut into the seller's profits and may not be justified if the increased product selection does not translate into higher sales.
- Difficulties with marketing and promotion: With so many products to choose from, it can be challenging for sellers to effectively market and promote their offerings. It can be difficult to focus marketing efforts and communicate the value of each product to potential customers.
- Increased risk of stocking slow-moving or unprofitable products: A high SKU count can also increase the risk of stocking slow-moving or unprofitable products. These products can tie up valuable inventory and storage space, and may not generate enough sales to justify their inclusion in the product line. This can lead to excess or obsolete stock, which can be costly to store and dispose of.
- Potential negative impact on customer experience: Finally, having a high SKU count can also potentially have a negative impact on the customer experience if it leads to cluttered or confusing product pages, or if it makes it difficult for customers to find the information they need to make a purchasing decision. This can lead to frustration and potentially cause customers to abandon their purchase or look elsewhere for products.
In conclusion, while a high SKU count can offer many benefits to eCommerce sellers, it is important to carefully consider the potential drawbacks and ensure that the business has the resources and capabilities to effectively manage a large inventory. By weighing the pros and cons and making informed decisions, sellers can maximize the benefits and minimize the challenges of having a high SKU count.