If you’ve ever watched the hit television show “Deadliest Catch,” you’ll appreciate the risks involved in running a business in the deep sea crab fishing industry. Each boat’s skipper is responsible for making critical decisions for his team to yield the best possible catch.
With many dynamic variables, such as competitors’ fishing locations, weather, crab pot locations, fuel costs, crew safety, seasonality and many more aspects unknown to non-fishermen, each boat is aiming to optimize its outcome for entrepreneurial gain while balancing risks.
Of course, running an online business doesn’t offer the same risks as skippering a boat into the Bering Sea—your fulfillment team is unlikely to be flung into subzero Alaskan waters with only eight minutes to live if something goes wrong. However, there are definitely some interesting analogies that can be loosely derived from one of the riskiest entrepreneurial jobs in the world.
Perhaps thinking about how you can be a more strategic e-commerce fisherman can help you catch significantly more orders this holiday season?
Optimizing your e-commerce catalogIf your catalog strategy is under-optimized you can find yourself fishing blindly for customers in a crowded marketplace with very low return
In this article, I’m going to discuss the importance of catalog selection. Catalog selection is the process of optimizing the collection of products to list or advertise for sale. In the fishing world, it is where you choose to locate your “crab pots” to yield maximum output. In the fiercely competitive landscape of marketplace driven e-commerce, this can be one of the most important components of your retail strategy.
Catalog selection is important in the evolving world of marketplace e-commerce as retailers find themselves trading commoditized goods that are increasingly easier for customers to find, compare and purchase from the best available offer.
If your catalog strategy is under-optimized you can find yourself fishing blindly for customers in a crowded marketplace with very low return. Without a catalog selection strategy, a high percentage of your product listings can be competing against dozens of other retailers, and your long-run profits are going to be suppressed to next to nothing.
Zero profit in the long run is obviously a terrible scenario. In economics, this is called “perfect competition.”
In a perfectly competitive scenario, no seller has the power to determine market price, as all agents in the scenario are selling a homogenous product and profits are driven to zero over time. If you’re selling on Amazon or another other competitive marketplace, I’m sure you’re well aware of this scenario. You’ve listed an item that everyone else seems to have, and you’re baffled as to how or why people are willing to sell it for so low a price.
Fish in unfished waters
As captain of your own e-commerce fishing vessel, finding unfished waters with an abundance of potential catch should be your focus. In a marketplace such as Amazon, millions of potential customers mean there are opportunities in many categories if you can maneuver and position yourself quickly to offer the right products to address the demand.
The reward to finding profitable products with high demand can be very lucrative. If you develop an effective process that can be iterated, it can also generate long-term value for your business. If you’re a smaller retailer who can make trading decisions such as adding new products rapidly, you’re in an excellent position to take advantage of this dynamic.
Larger retail companies that may be focused on brick-and-mortar buying patterns are likely to be tied to inventory purchasing focused on addressing in-store retail requirements. For example, brick-and-mortar apparel retailers often plan to purchase inventory a season in advance, and focus on “size runs” to offer a typical selection to address typical in-store shoppers.Cutting down your catalog to focus on your best opportunities will help you restock and identify trends faster and more accurately
Counter intuitively to theories of traditional retail, performance of this traditional method of catalog selection can often be poor in an online setting. If a salesman or purchasing contact is telling you to stock size runs, you’re likely to be going head to head with almost identical catalog coverage to a handful of your competitors. In the crab fishing analogy, you’re simply flocking to the same crowded waters to cast your pots.
Focusing your e-commerce catalog
At Teikametrics, we provide technology to analyze competitive coverage and potential demand for product listings. Similar to the sonar shoal detectors used by fishermen, we’re able to help our clients find opportunities for valuable listings that have low competition and higher demand.
Objectively using this process to review your catalog, rather than just listing products blindly, is an approach that can give you a competitive advantage over the majority of sellers on the Amazon platform and other marketplaces. For this reason, some of our best performing clients have surprisingly small catalogs.
Focusing on the highest value opportunities and cutting out non-competitive product listings to trim down your catalog can dramatically improve your performance and efficiency. Why list products on Amazon that you are never going to be competitive with? Although Amazon has no listing costs, per se, listing non-competitive products creates more operational overhead with potential customer service or data management costs. Cutting down your catalog to focus on your best opportunities will help you restock and identify trends faster and more accurately.
If you’re looking forward to this upcoming holiday season, you can start this process immediately by segmenting your catalog by brand, and conducting a simple review of each set of products to see if your prices are competitive. Find out which products you are wasting your time with, and think about products where you have an advantage in terms of supply or spotting demand trends. Leverage your competitive advantages with these products and you will be able to develop an actionable strategy to steer your e-commerce vessel into profitable waters faster than you think.
The potential payoff for spending time researching and refining your catalog, looking for new brands, listings and new trading opportunities means that these types of tasks should not be seen as just routine maintenance operations—they should be at the core of any merchant’s marketplace strategy. If not, you can be sure there is competitor out there carefully navigating around you to find a hidden catch that you’re missing out on.