Fortunately, data is readily available from Internet Retailer that can help verify whether this hypothesis has merit. Here is what I did with the Internet Retailer top 500:
- Excluded the bottom 200 sites, as sometimes companies can not be entirely honest about their sales, in order to make the top 500.
- Excluded companies with sales above $1.5 billion (outliers that can skew results).
- Excluded companies with sales below $16 million (may have lied about sales).
- Excluded companies that did not report how many skus are available online.
The table below illustrates key metrics from the analysis.
|Internet Retailer Website Performance By Number of Skus Offered|
|Skus Offered||Sales (000s)||Rate||per Visitor|
First, I don't want to suggest that any particular strategy is better or worse. Whatever is right for your brand is the right strategy. I am not advocating you should increase or decrease skus.
I do want to illustrate a few key findings.
- More skus yielded increased sales. It could be that these companies are more established. Or it could be that these companies sell more because they offer more. There was a healthy distribution of top-selling companies, and bottom-selling companies, in each segment.
- Conversion rates decrease as skus increase. Does this suggest that websites become more difficult to navigate as skus increase? Chalk that up as a possible hypothesis that needs to be studied.
- Not surprisingly, sales per sku decrease as skus increase. This is in-line with the hypothesis advocated by Mr. Anderson.
Good job, Mr. Anderson! The hypothesis has merit, so long as the company can execute the strategy profitably.