While retailers might think the most profitable sales strategy is to sell only the items that are most popular with consumers, new research finds that selling those that are not as in-demand can still pay off. The research shows that the more products a retailer offers online, the more revenue the retailer makes.
Junzhao Ma, the study's authors and a lecturer in the marketing department at Australia's Monash University, said overall customers end up spending more online because it's easier to search for those items.
"Low-selling (niche) products are regularly pruned from the product line to reduce operational complexity and corresponding cost...but as shoppers grow more accustomed to the idea of searching for niche items online, carrying these niche products can not only yield additional revenue but also help retailers recruit and retain customers," Ma wrote in the study.
For the study, Ma examined data from a large U.S. apparel retailer that offers both printed catalog and internet shopping. Specifically, he looked at the effect on the retailer's main products, which are in high demand and offered in the catalogs, and the less-popular niche items that were available on the retailer's website, but hard to find in its catalogs. [See Related Story: Retail Balancing Act: Selling In-Store and Online]
He discovered that online shoppers spent significantly more than catalog shoppers on both popular and low-demand products. Specifically, they spent 11 percent more per year on the popular items and 250 percent of the hard-to-find niche items.
"Our research suggests that the online sales of low-volume niche products can be an important source of revenue for the retailer," Ma wrote.
The study,"Does Greater Online Assortment Pay? An Empirical Study Using Matched Online and Catalog Shoppers," is scheduled to appear in the September issue of the Journal of Retailing.