Ask any VP of Ecommerce or Online Merchandising Manager what they are doing to increase conversion rate and revenue on their site and they are likely to tell you they are using the latest recommendation engine to generate a highly personalized shopping experience. I would say they are leaving money on the table.
Click on a pair of shoes and it will show you three other popular choices, a belt and a handbag to go along with it. Recommendation engines can be simple or quite sophisticated but the objective is the same; increase conversion rate and AOV (average order value).
So with all of this technology available to dynamically personalize the shopping experience for online shoppers, what place does a “Milk and Eggs” approach have in a cutting edge Ecommerce operation? Better yet, what is a “Milk and Eggs” approach?
This term is familiar to anyone with traditional merchandising experience. Slot The concept is pervasive in the retail world and has stood the test of time for one simple reason; it works. You put the Milk and Eggs in the back of the store because you know the customer will find it regardless of location. Other products are strategically placed in route to and from the milk and eggs to increase exposure a.k.a selling opportunities which in-turn increases AOV.
The same principle applies to online merchandising but many people are missing the boat. How many sites to you see put the “Top Sellers” or “Most Popular” items at the top of the page or category? This is a self fulfilling prophecy. Your Top Sellers are in the top slots and they remain your Top Sellers as you would naturally expect. It’s like putting your Milk and Eggs at the check-out.
Imagine the following Ecommerce scenario in which 12 products fit on your category page. Product A is your most popular product so you put it in slot 1. It sells $100 in a given day and Product B which is less popular is in Slot 16 (page 2) and it sells $25 for a total of $125 in sales.
An optimization algorithm following the Milk and Eggs approach would put Product B in Slot 1 and Product A in Slot 8. Product A would sell $90 but Product B sells $60 for a total of $150 in sales which is a 20% increase in sales just by changing your slotting order.
Now that is an online merchandising strategy worth looking in to.
If you are already using a recommendation engine, think how powerful it could be if the underlying product lists the recommendation engine was drawing from was optimized in this fashion.