Understanding the Impact of Product Selection

Editor’s note: This is a guest post by Dani Avitz, COO at Algopix.

If you sell products online, product sourcing is a critical part of your business. How do I figure out what to sell online? is a basic question that every online seller has considered and for good reason – product selection is at the core of eCommerce and the right product selection can make or break your business. Unfortunately, most online sellers are still relying on antiquated processes for selecting the best products for their business.

How it’s currently done

The story typically goes something like this: You receive multiple price quotes from multiple vendors on a daily, weekly or monthly basis or you reach out to your trusted network of suppliers for their recommendations. Depending on the size of your organization, you may pass it along to an analyst to do some number crunching but more than likely, they either trust the vendor’s recommendations or just make a gut call. You place your order and carry on with your day.

Sound familiar? You’re not alone – in my 10 years working with eCommerce departments, this is the go-to process. Like any gut-feeling decision, sometimes it works out exactly as you planned but sometimes (more often than not), it doesn’t and when it doesn’t, the consequences can have a serious impact on your business.

The cost of inaccurate product selection

The three biggest consequences of making the wrong product selection are:

1. Wasted time – it’s obvious but it’s a fact. By ordering the wrong product, you have delayed getting the right product and created more work for you and your team.
2. Deadstock – it’s one of the biggest problems facing online sellers. Products that don’t move have a direct cost and an opportunity cost to your business.
3. Lost opportunity – buying the wrong product costs you sales opportunities, opportunities to move your business forward.

So how can help your business avoid some of these common product sourcing pitfalls? Before you even begin, ask yourself two few very important questions. First, how familiar are you with these products? Secondly, do you know and understand the target audience? These are obvious questions but they will dramatically impact your ability to market, promote, and sell as well as any customer service efforts post-sale.

Do your homework

 From there, it’s time to do your homework. If you’re a larger seller, you may have relationships with third party agencies that can help do the heavy lifting for you. eCommerce agencies can be a great extension to your team; they can also prevent you from getting into important detail that could impact your future decision making. You may also have an in-house team that has experience with sourcing, specific marketplaces like Google, eBay or Amazon and is accustomed to working with large Excel files. For many online sellers, they are left to their own devices to look at the data and make a decision. No matter which of the three categories you fall into, here are three important considerations for your research:

1. Understand your product identifiers. Take a look at the price quote you received from your supplier and map the identifiers. Did they use a UPC (12-digit-barcode), EANs (13-digit barcode), ISBN (12-digit barcode specific to books) or ASINs (Amazon’s 12 digit barcode)? It’s important to start at the right place with the right product identifier to avoid wasting time in the wrong place with the wrong identifier.
2. Measure the product’s presence. Share with some basic analysis – how many sellers offer this product? How many reviews or sales history does it have? Check for the seller’s feedback. Google the product. All of these data points will help you understand the demand for a product. Google Trends and Google Keyword Planner are two free tools that can help you understand interest level over time for a specific search term by providing data around monthly search volume and average cost per click.
3. Understand product performance in marketplaces of interest. For Amazon, take the time to look at the number of reviews, the review score, the number of sellers, whether or not Amazon is a seller, and whether or not the product is located in Amazon’s Fulfillment Center (FBA) which is often an indicator of high demand. For eBay, consider working with a software provider that can give you the monthly sales volume per item.

There are some great solutions in the market that help online sellers do a lot of this manual work on their own and can be a great tool for both established product sourcing teams or entrepreneurs just getting started.

One Final Thing

Even with all of the right data, even the best online seller will occasionally select a product that doesn’t perform as expected – it’s the nature of business. Don’t get discouraged. Take the opportunity to review your process, understand the data and make improvements moving forward.

Algopix, based in Palo Alto and Tel Aviv, provides comprehensive product sourcing insights for the eCommerce community. Using advanced algorithms, Algopix helps online sellers source and sell with confidence by answering some of the biggest questions facing today’s eCommerce sellers like what product to sell, where to sell it and how to price.