How to Organize Retail Products Into Product Categories (2024)

Most retailers sell a wide range of goods to meet customer needs and preferences. A homeware company, for example, might sell hundreds or even thousands of items ranging from cozy faux fur throws to elegant flute vases. To manage this array of offerings, retailers group goods into product categories.

Product categories help businesses organize their inventory, streamline business operations, and create an easy-to-use shopping experience for customers. Customers, in turn, benefit from a product category system that lets them easily navigate the store or website, quickly finding the items they want. Let’s explore the benefits of product categories, best practices for categorizing products in ecommerce, and strategies for successful product category marketing.

What is a product category?

A product category is a logical grouping of similar products with common functions, features, or intended uses. Product categorization helps businesses operate efficiently while providing customers with a satisfying shopping journey.

In a typical product category hierarchy, top-level categories are the broadest groupings of products, such as “clothing” or “electronics.” Within each top-level category, there are more specific product lines or subcategories; for example, under the “clothing” category, you might find subcategories like “men’s clothing,” “women’s clothing,” and “children’s clothing,” each of which can be further divided into even more specific categories, such as “shirts,” “pants,” or “dresses.”

Why are product categories important for ecommerce?

Product categorization is an important part of designing a user-friendly ecommerce store. Organizing your products into clear, logical categories and subcategories can help achieve the following benefits:

Improved website navigation

Clear product categories on your ecommerce website improve navigation, making it easier for customers to find the items they need, such as connected products within a specific category.

For example, if a customer is looking for a new yoga mat at a fitness outlet, well-defined categories like “yoga equipment” and “yoga mats” help them quickly find the desired product and compare relevant goods. This reduces friction in the shopping and buying process, increasing the chances of a sale.

Increased offsite product discoverability

Beyond your own website, well-organized product categories can help more customers discover your products through search engines and other online channels, driving traffic to your ecommerce store. When you go through an SEO checklist and optimize your category pages with relevant keywords and descriptions, you increase the chances of your products appearing in search results when customers look for those items.

For example, if a customer searches for “formal wear” on Google, your well-optimized category page for “evening dresses” or “tuxedos” could appear in the search results, attracting potential customers to your site who may not have previously been aware of your brand.

Streamlined inventory management

Product categorization not only benefits your customers but also streamlines inventory management for your ecommerce business. By grouping goods based on product type, you can more easily track stock levels, identify popular items, and make informed decisions about reordering and inventory forecasting.

For example, suppose your company sells cosmetics and you have a foundation category organized by skin tones. In that case, you can quickly assess which shades are selling out faster and need to be restocked more often.

Targeted marketing and promotions

Distinct categories help you to create targeted marketing campaigns and promotions that cater to specific customer segments and their unique interests.

If your company sells outdoor gear, you can create a targeted email campaign featuring camping equipment discounts to increase engagement, drive sales, and ultimately boost brand recognition among your ideal customer base.

Better customer insights and analytics

Analyzing customer behavior and preferences across different product categories gives your ecommerce business valuable insights and analytics. By tracking how consumers interact with various product types and navigate between other products, you can identify trends, popular items, and potential areas for improvement in your product offerings or packaging.

For instance, if you notice that customers who purchase mobile phones frequently also buy accessories like phone cases and screen protectors, you could create a bundled offer or cross-sell these items on the product page, improving the customer experience and increasing average order value.

How to categorize products for ecommerce

1. Understand your product assortment and customer needs
2. Define clear and intuitive category hierarchies
3. Ensure consistent and accurate product data
4. Implement user-friendly navigation and filters
5. Continuously monitor and refine based on data insights

Categorizing products for your ecommerce store is a multifaceted process that requires careful consideration and planning. To develop a comprehensive product categorization strategy, follow these steps:

1. Understand your product assortment and customer needs

Start the categorization process by analyzing your product assortment and identifying items to group together based on common characteristics or uses. If you have many products, balance creating enough categories to keep things organized while avoiding an overly complex structure that may overwhelm or confuse shoppers.

2. Define clear and intuitive category hierarchies

Next, consider your target audience and their needs, preferences, and shopping behaviors. This will help determine which categories and subcategories make the most sense for your customer base. Create a clear hierarchy by defining primary categories based on the most important attributes or characteristics, such as product type, gender, or age group. Then, establish sub-categories that further refine these groupings based on more specific attributes like size, color, material, or style, ensuring that the hierarchy is intuitive and easy for customers to navigate.

3. Ensure consistent and accurate product data

Maintain accurate and complete product data to ensure that your goods are categorized correctly and consistently so that customers can filter and search for items within a family of products. By establishing standard naming conventions and attributes across your product catalog, you can ensure that products are properly assigned to the right categories and subcategories.

4. Implement user-friendly navigation and filters

Implement clear and intuitive category labels, breadcrumb navigation, and attribute-based filters that help users easily browse and find the products they want. Let customers refine their search results based on criteria like price range, brand, or other relevant product characteristics. Consider using auto-assigned product tags or keywords to improve search functionality and help customers quickly locate the items they’re looking for, even if they don’t know the exact category or subcategory to explore.

5. Continuously monitor and refine based on data insights

Regularly monitor and analyze your ecommerce site’s performance data, such as search queries, click-through rates, and conversion rates, to identify areas where your product categorization may need improvement. Use these insights to refine your categories and subcategories, aligning them with your customers’ changing needs and preferences. Additionally, keep an eye on your competitors’ product categorization strategies and adapt your own approach to stay competitive and provide the best possible user experience for your customers.

What is product category marketing?

Product category marketing is the practice of promoting and selling a specific group of related products, rather than individual items, to a target audience. For example, a fashion retailer might create a marketing campaign focused on athleisure clothing, highlighting the comfort, versatility, and style of products like leggings, sports bras, and sneakers.

Product category marketing helps you guide customers to find what they’re looking for, whether they’re browsing online or in-store. An ecommerce store selling pet supplies might create a “dog toys” category marketing campaign featuring targeted social media ads to attract dog owners looking for fun and durable playthings for their furry friends. By providing clear, informative content about each category as part of your marketing strategy, you can guide customers toward making a purchase decision and increase sales within that product group.