Organizing your products

Transcription

1 Organizing your products Whats inside If you re a small business selling inventory then you are sure to have come across some of the pitfalls it entails, but getting it right could be more important than you think. Accurate inventory underpins the rest of your business from making sure you can come through on promises to your customers, to getting your accounting right for ww.brightpearl.com

2 Welcome to Organizing your products A well designed product database is an essential component of successful retail. Your product information is used all day, every day, by your staff and your customers. Without a solid product database, everything will become time consuming, inefficient, and prone to mistakes. We ll assume that your business is selling on multiple sales channels and running multiple software systems that contain the same products. Integrating these systems is only possible if you plan your product structure properly. This ebook describes how to structure your products for insightful reporting, reliable inventory management and easy maintenance. 2

3 Understanding product attributes Every product will have attributes (data fields), and each software system that stores the product will have different structures for the attributes. Let s break attributes down into different levels. Core attributes present in every system Every system will have these fields for a product Name SKU - Stock Keeping Unit (or other unique code) Price Inventory level Tip: It s handy to have a SKU that actually means something, and if you re smart in your SKU design you can use it to filter sales and inventory reports by range, brand, season, size and so on. Variation attributes for inventory management Some attributes are used to differentiate products of a similar type (in the same product group ). Let s call these sub-products the variants. Each variant will have its own inventory level. Attributes used to differentiate inventory variants could include: Size Colour Width Height A product will have other attributes, such as manufacturer, but the other attributes should have the same values across all variants, and are therefore not inventory attributes; they don t help you tell which variants you have in stock and which you don t. Tip: Attributes on a shopping cart system for things like gift wrap are not inventory attributes, they are only applied when the item is purchased and are called customizations. If you re integrating an ecommerce platform with an inventory management system you need to be careful with customizations, especially if the customization involves another inventory item (which is actually a bundle, assembly or kit ). 3

4 System-specific attributes These are attributes that are used only on that system, perhaps to enable filtering, reporting, better search results or improve the shopping experience. An accounting system will have products, but doesn t need images or description. An ecommerce system will need more attributes than other systems because the customer is self-serve; they need all the information they can get. Examples of system-specific attributes are Image and Description, for ebay and your online shop Compatibility (eg wheel X only fits bikes Y), for Manufacturing Website category, for ecommerce Barcode, for Point of Sale Nominal code and Cost price, for Accounting Tip: Due to the varying purposes, data model and business rules in each software system, it s not possible to synchronize all values across all your systems. Be prepared to do the management and updates for certain attributes in the systems where they are required, rather than in your hub system. Language and other attributes Attributes are used both to differentiate products in the back office, but also to help the customer buy the right product. Each sales channel will have its own way of managing attributes. A multichannel retailer may well want to have multiple sales channels targeted at certain countries; which requires modification of attributes specifically for that channel. Language is a typical example; your central hub system would have an attribute Size, but your French ebay store would show it as Taille. Tip: Don t set up your product database with too many attributes. The more you have, the more data you need to manage, and the more time it will take. It s also going to be harder to keep under control as you add more products. 4

5 Attribute types Every field on a product has a type - the product name field is text, for example, and the price field is numeric. When you add extra attributes, some systems let you define what type the attribute is. Here are the choices in Magento, for example: Generally, you can choose any field type you like, apart from where you need to synchronize different systems. In this scenario, you need to ensure that the field type on one system doesn t allow data that the other system can t support. The most common mistake is to set up attributes for variants using an attribute type that is freeform or multi-select. Your attribute type should be a drop-down menu or radio buttons, where you are only able to select ONE size or ONE colour for any particular product variant. Each variant will have its own unique SKU and will be linked to your central inventory management system. 5

6 Attribute sets, Product types, Option groups A typical retailer s product range will contain over 1,000 SKUs and will need a range of attributes. Take a typical clothing retailer. They sell shoes, shirts, trousers, hats, accessories and so on. Each of these products has a different type of size. If a software system only allows size, then all the size values for shoe sizes, waist sizes, helmet sizes, shirt sizes and so on would make a long, unmanageable list. 1. Create attributes with sensible ranges of values It s better to create further attributes, such as shoe size, with values that are relevant; 6, 7, 8, 9, 10. Similarly, for helmets; helmet size of 56cm, 57cm, 58cm. For trousers; waist size of 30, 32, 34 and so on. Each list of sizes is smaller and easier to use, and you re also less likely to pick the wrong one when creating new products. 2. Create attribute sets Some systems allow you to go one step further and group these attributes into sets that are used for certain types of product. Attribute sets are helpful for ensuring that products being given the wrong attributes, so for example items of type helmet aren t given a shoe size. Some systems call these option groups, and as they are related to the type of product, it s sometimes called product type. For the retailer example, you d create an attribute set called Shoes. Shoes would have attributes shoe size and color, but not waist size. When you create the product, you first choose the attribute set (or product type), which then ensures that the other assigned attributes are correct. Shoes Trousers Helmets Shoe size Color Waist size Helmet size Tip: Even if you re not going to use attribute sets for grouping attributes, it can be useful to use when reporting, so you can see what type of products are selling well (or not). Don t create too many, though, otherwise your data will become complex. Up to 50 attribute sets / product types is reasonable. Some systems (such as Magento) don t let you change the product type once it s created, so it pays to plan ahead. Magento uses Attribute Sets. Big Commerce uses Option Sets. Brightpearl uses Product Type to group options for similar products. Shopify uses Product Type, but this does not relate to options. Have a think about what your system uses. 6

7 Variants and Product groups Say you have a tee shirt of a certain style that has 3 different sizes. Each of the sizes are variants of the product. A sweatshirt that has 3 sizes and 2 colours could potentially have 6 variants, assuming that all sizes are available in all colors. We say that all these variants are part of a product group. In the apparel industry, this is often called a product line. Size Colour Style code SKU (must be unique) Sweatshirt Small Red SW638 SW638-SM-RD Sweatshirt Med Red SW638 SW638-ME-RD Sweatshirt Large Red SW638 SW638-LG-RD Sweatshirt Small Grey SW638 SW638-SM-GR Sweatshirt Med Grey SW638 SW638-ME-GR Sweatshirt Large Grey SW638 SW638-LG-GR Each software system handles variants in different ways; some systems have a parent product within which live sub products for the variants (eg Big Commerce and Shopify), and some systems manage all the variants as distinct products and need a separate way to group the items together (for example the configurable product in Magento that groups simple products together). The tee shirt example with 3 different variants has one inventory attribute (size), and the sweatshirt has two inventory attributes (size and color). There may well be extra attributes, such as brand, but this should be the same across all variants in the same group, and does not differentiate them for inventory purposes. As another example, women s jeans, we can see 8 different product variants in the same product group: All variants in the group share the same name, description and product type, but will have different inventory levels, different SKUs and perhaps different prices. There are four options here that differentiate the variants; Fit, Length, Waist size and Color. Adding too many attributes makes things rather complex, so when you get a large product group with many variants, it s better to split it out into smaller groups by promoting one of the options into the product name. Here you d probably choose fit, and create one group for Loose jeans and one for Slim. Tip: in order to integrate sales channels (such as ecommerce platforms) with a central stock control system, make sure each variant within a product has its own, unique SKU and can have a separate inventory level from the other variants. Do not use custom attributes in Magento, these are not separate variants with their own inventory level. 7

8 Setting up products without variants (flat structure) In the simplest setup, you would create a separate product for each of your inventory variants, with enough information in the product name to differentiate products that are essentially similar, but only differ by size, color etc: Billabong X-ultra wetsuit boot, EU40, Black Billabong X-ultra wetsuit boot, EU41, Black Billabong X-ultra wetsuit boot, EU40, Grey Billabong X-ultra wetsuit boot, EU41, Grey Advantages Simple to set up, does not require creation of option sets, options and option values. Easy to integrate systems; no need for options. Disadvantages Six times as many products at the top level, which can make websites hard to browse. More work to create multiple products (unless you re working from a spreadsheet). Any changes to the name or description of the X-ultra boot will require you to update all the variants; they are not linked. Product names become long, and since the attribute information is at the end of the name, it can often be missed or invisible. Risks inconsistency as you type each product name separately. 8

9 Setting up products with variants With variants, you would have a group of similarly named products that would look like this: Main product Variant Variant Variant Variant Billabong X-ultra wetsuit boot - EU40, Black - EU41, Black - EU40, Grey - EU41, Grey Most systems let you create the master product and then assign the option attributes, so that you only have to create the product once. Advantages Simpler browsing and searching on an ecommerce store Much faster product management; typically most changes are just made to the group or master product Once you have defined an option or a value, some systems let you reuse it for other products - this ensures consistency; so that your sizes are always Small not S or Sm, for example Consistency makes it much easier to deal with more sales channels. Consistency makes it easier to report on which variations are selling well. When selling on ebay, the number of product impressions counts for your ranking in search. If you group similar products using variants, then you will have a higher impressions : buy ratio. Some systems let you manage complex product groups in a matrix (grid) layout, so it s easy to see if other variations are available; say you have low stock on Black, in a grid layout it s easy to see if you have any Grey, for the same size. Disadvantages Requires more work to get separate systems to talk to each other properly, to ensure you ship black when customer buys black! Some systems require that you set up your variants in advance of creating products, which can sometimes take more time. 9

10 Use attributes to improve your ecommerce store It s a good idea to use your ecommerce system s attributes capability in order to help your customers find what they are looking for - especially if you have a large number of products. So, let s say we have given pair of jeans 5 different attributes. On the website, the layered navigation (filters) can be seen on the left of the screen, making it much easier to find the right product: 10

11 Maintain consistency with your Product Options Different manufacturers will have different values for size and colors; some may call an item Small and some may call it S. In this case, they are the same thing, so make sure you only use one of the two in your own system. As we ve seen above, creating additional size attributes can be useful, allowing you to have the following: Child size Adult size Small (2-4 yrs) Small (28-30 ) Medium (5-7 yrs) Medium (32-34 ) Large (8-10 yrs) Large (36-38 ) In the case of colors, though, it s generally best to use the manufacturer s color to avoid ambiguity when selling and buying. It can lead to having hundreds of colors on your system, but will save you time and money by preventing mistakes. In some industries, Black/White and White/Black are very different products. Tip: Don t rely on all your separate systems having the same name for options. Make sure you have unique SKUs for every variant, and that those SKUs are the same across all your systems. 11

12 Categories A category is really just another attribute for a product, but it s generally used in different ways depending on the software system. An accounting or inventory management system will use categories for filtering products when adding to orders and for filtering reports. An ecommerce system such as Magento will use categories as a key part of the navigation to help users find the products they are looking for. In the ecommerce scenario, the category has extra data associated with it, such as a description, images etc. In an ecommerce system, products can usually be placed into multiple categories in order to provide for different users navigation routes. Tip: Categories are best used to improve buyer experience, which means that you should optimize the category structure differently on each system depending on who will be using it. For back-office reporting and inventory management, the product type (attribute set) is quite often a better and simpler filter. Since categories are hierarchical (they have parent/child relationships), you have the situation where different systems respond in different ways to the selection of a parent category; sometimes there is drill-down (which would display all products in all sub categories) and sometimes there isn t. Tip: Don t create too many categories since this will mean that you have fewer items in any one category. Use other attributes to filter search results if you need. Think about how your user is trying to find their item. Categories are generally for browsing (as opposed to search), and too many categories with too few products in each can be frustrating. 12

13 Finding products - Optimizing for Search All systems will have some kind of product search, the capabilities of which can vary enormously. A basic search would just check for exact matches on a product name, or part of a product name, and perhaps the description and SKU. More advanced systems will search the attributes too, so if a user typed small tee shirt, they would only see the products that had small variants. ebay does this - which is a good reason to use the correct attributes on your ebay listings. Understanding how your users and customers are trying to find products is essential. Each system should ideally be optimized for the specific audience; how you structure your Point of Sale software for your shop staff may not be the same as how you set up your ecommerce store for your web visitors. You can instruct your staff to search in a certain way, but you can t control how your customers might be looking for items on your website. Where possible, track the searches and results that are returned so you can see how to tune your database appropriately. If your ecommerce system doesn t have search tracking built in, it s worth investing in a custom solution. 30 % of visitors use the search box first when shopping online, and have clear intent to find a particular item, so if you can return the right results first time you are much more likely to get the sale! 13

14 Tax and prices Most systems store product prices excluding tax (Net). This allows you to add tax depending on the customer/supplier/product combination, at the point of sale, which may be in store, on the phone or online. Your sales software should let you choose whether you display prices including or excluding tax. Due to rounding, in order to support every value of gross price, your system should allow the net price to be stored up to at least 4 decimal places. This is best shown by way of an example. Say you want to sell something at 1.95 including tax (gross), and the rate is 20% / 1.2, which gives a net price of If the net price is 1.63, the 2dp rounded gross price comes in at If the net price is 1.62, the gross price comes in at It s not possible to get 1.95 gross with a 20% tax rate unless you store the full 3 decimal places of the net price. If you sell the product to a non-taxable region or non taxable customer (perhaps it s an export) you would sell it at If you need to maintain a non-taxable price of 1.95, then consider creating a new price list for export sales. Every software system handles this differently, so make sure you understand all your systems fully, and ensure that any tax amount captured on a sales channel (e.g. your ecommerce store) is retained all the way through to your tax reporting system. Sales tax (USA, Canada etc) In countries where Sales Tax is charged, products are either taxable or non-taxable. Taxable products sold to the final end consumer should have tax added at the final sale. If the product is sold for resale, sales tax is generally not charged. Every state has different laws regarding which products are taxable and which aren t, so consult your local tax office or accountant for full information. The sales tax amount is added to taxable products using a tax rate depending on the buyer s location (the tax rate is not assigned to the product). VAT / GST (United Kingdom, Ireland, Australia, South Africa etc) In the UK, or other VAT based countries, products are given one of a range of tax codes. Each tax code has a rate, which is used for domestic sales of that item (inside the EU). If an item is exported, tax is not payable and the system uses a 0% not applicable code for the sale (usually T9). If a taxable item is bought from a UK merchant by a VAT registered customer within the EU, then tax is not payable. These sales need to be recorded on the VAT return separately, so another 0% code is used (usually T4). For consumers in VAT regions, prices are quoted including tax (gross), to 2 decimal places, but the system should still store the net price to allow for sales outside the VAT zone which are not charged any tax. 14

15 Seconds / pre-used goods If you take used or damaged goods back from customers, then you ll probably want to track these separately from the equivalent new items. They will have different inventory levels, and a different specification due to the usage, damage or repair. If it s important to describe the flaw in detail, you ll need to create a new SKU every time an item comes in with a new problem, and track inventory in the normal way: Canon XM300 digital camera - missing wrist strap Qty available = 1 If you regularly get returned items and don t need to describe each flaw in detail, you could create a generic SKU for the item, where the customer could be sent any one of the pre-used products: Canon XM300 digital camera - pre used Qty available = 5 Because you have limited inventory of these items, creating a new SKU and making sure inventory is synced across all your sales channels helps prevent double-selling. 15

16 Sales reporting When planning your product structure, think about the kind of reports you would like to generate later. Consistent data gives the best results, especially so when dealing with product options and option values. When you come to buy more stock next year, you ll want to be able to report on which options sold best the previous year. Did you sell more shoes of size 6 than size 5? Was it US size 5 or UK size 5? In this example, it s best to make sure you re explicit; sizes should be US 5, US 6 etc. If you want to invest a certain amount in smaller sizes (regardless of product line), and a certain amount in larger sizes, consider how you d produce sales reports for best-selling small items. Often, the SKU is a great place to put this kind of information since most reporting systems will let you filter by SKU. If all your small items have -SM- in the SKU (e.g. TEE-SM-RED), then it s easy to find all small items once you ve got your data in Excel, using a search. Note the dash separator; searching for SM will bring up far more than just the small items! Multichannel: integration with other systems It s likely that you ll have a central back office hub that manages inventory across all your sales channels (online shop, telephone, ebay, Point of Sale etc). This means that your products need to be entered into different software systems, each of which will have different rules and structures for handling variants. The golden rule is to make sure that every product has a unique SKU, which will be used to link products across systems. Tip: To be sure that you are compatible with all systems, it s best to keep your SKUs under 32 characters. Because each system has a different way of handling products, it s generally too complex to synchronize all attributes across all systems. Making sure that inventory levels are the same across your whole business gives the greatest benefits, since it prevents you selling more than you have in stock, and also makes it quicker to make new inventory available across all channels when more stock comes in. 16

17 Related whitepapers The 5 Principles of Commerce Acceleration The Commerce Acceleration Journey : Where Are You? Inventory Management Done Properly Managing Products in a Multichannel Environment Inventory Reporting and Optimization United Kingdom First Floor, New Bond House, Bond Street, Bristol, BS2 9AG Phone United States 625 Market Street, 6th Floor, San Francisco, CA 94105, USA Phone