SKU Proliferation in Ecommerce Order Fulfillment and How to Manage It

If your ecommerce product business is looking to grow, one common way brands scale is by adding new items to their product line. This is known as SKU proliferation and it’s a great way to meet customer demand, extend customer loyalty, expand audience, and best of all, increase overall revenue.   

There is a downside to increasing the number of SKUs (stock keeping units) to your product line—it can be difficult to manage if your operations aren’t set up properly. Don’t let order accuracy diminish, packing and shipping issues go unchecked—here is more about SKU proliferation and how to manage it successfully.  

What is SKU Proliferation?  

SKU proliferation is simply the process of adding more products and product variations to the line of goods your ecommerce business sells. It can happen over time, or quickly depending on your business goals, seasonality and the market you’re in.   

The key to successfully adding SKUs without running into problems is to first streamline your operations and supply chain to ensure your business can handle the expansion without sacrificing quality or customer satisfaction. 

Examples and Causes of SKU Proliferation in Ecommerce Retail  

SKU proliferation is a great strategy to meet customer demand. Whether you want to reach a new demographic, expand to a new region or country, broaden your product line or boost your ability to bundle products together.   

Here are some common examples of SKU proliferation:   

1. Create add-ons or accessories – Let your customers customize products with the personal touch of accessories. This is popular with consumer electronics, cars, jewelry, shoes.    
2. Expand color or size options – Introduce new color varieties to match the season, expand your size options (travel size, family size, plus size, etc). These new SKUs work especially well in apparel, shoes, wearables, beauty, cosmetics, personal care, home goods, toys, and kids’ products.   
3. Introduce new flavors – Make it seasonal, limited edition, or round your offering with new flavors. This works for any consumables like food, beverage, supplement, vitamins, wellness products, and more.   
4. Iterate and launch new features – To keep customer loyalty many brands rely on releasing products with new features on a regular basis. Especially important for consumer electronics, technology products, or any vertical where improvements are often made to enhance product viability or functionality.   
5. Offer any variations – Customers might want a variation of your current product line. This works for any ecommerce vertical, and the catalyst may come from customer demand or supplier/manufacturer opportunities.   

Fulfillment Efficiencies and Automation for SKU Management  

The biggest potential hurdles to successful SKU proliferation are overall warehouse management and order fulfillment flow. Without optimizing these first, you’re bound to run into issues and lose customers.   

Here are a few checks to make before adding any more products.   

Ensure your warehouse has enough room to store new SKUs. More products require more physical space, it’s that simple. Check to make sure you’ll have enough storage in the short term and long term.   

Test your tech stack against all possible needs. You’ll need to ensure you can add, track and manage all your new SKUs through your inventory management system, fulfillment software, returns management and ecommerce platforms. You may also need to set specific automation rules for certain SKUs, which will need to be tested before adding them.   

Prepare your packaging. Adding new products means potentially making new decisions about kitting and packaging. Whether it’s for individual customers (DTC) or retailers, all products and potential product bundles will need packing details to be figured out.   

Benefits of SKU Proliferation

While there are many ways for ecommerce brands to grow their overall revenue, SKU proliferation is a common way to get there. Certain verticals are better suited to add more SKUs than others.   

• Stay agile to meet demands of the market   
• Increase sales  
• Increase revenue  
• Reach a broader audience  
• Retain customers for longer   
• Gain a competitive advantage  

How a 3PL Can Help with SKU Rationalization and SKU Management 

The challenges of SKU proliferation can be many. Adding more items to your product line increases the complexity of warehousing, packing, bundling, and fulfilling. Details may be lost that affect how products get packed up together, or specialty labels that are needed to ensure safe handling.  

A great way to combat any operational issues that arise is to work with reliable partners that can help streamline and manage more SKUs. They can help your business with SKU rationalization, which involves analyzing your overall inventory and making decisions on which items to keep, reduce, re-order, or eliminate. SKU rationalization is one of many ways a reliable and experienced 3PL can help your overall business profitability.  

Here are the main ways a 3PL (third-party logistics) provider can assist operational efficiency when you add more SKUs.   

1. Stop and Set Up New SKUs. Some young ecommerce brands might get excited about offering new variations or iterations of their current products and start marketing them before your operations team is ready to handle them. A reliable 3PL will help you stop moving too quickly and take the time to properly set up each new SKU in the system. They’ll also likely help you test any bundles, add-ons, or features for quality control.  
2. Document. Part of the process of getting the unboxing experience perfect is writing up great work instructions for each new product. This includes how product should be packed, and any special details needed to understand to get new items shipped out exactly right.  
3. Track Complex Scenarios. Not all SKU variations are the same. An accessory that always goes with a certain product may need to be linked within your WMS (warehouse management system). To properly track your many SKUs your 3PL needs to be tech-forward and have modern, easy-to-use tools for your team.   
4. Catch the Details. As you add SKUs to your products mix, it’s always important to monitor consumer experience for any anomalies. Your 3PL should have a strict corrective action plan process for any issues that arise. Incorrect packing materials, product damage, or incorrect orders can easily happen when you start launching new SKUs.  
5. Inventory Management. Every ecommerce brand should be conducting an annual inventory audit. A reliable 3PL will have the experience to establish KPIs and inventory tracking for slow-moving items, deadstock, or other issues you may run into. They should also help with forecasting and managing overall SKU counts to ensure you’re not overpaying on storage costs or inventory carrying costs.  

Bottom Line   

Before adding more items to your product catalog, it’s important to work with a reliable fulfillment provider to ensure your business is ready to expand. First take a look at your existing products, your cash flow, and if you have the storage space available to add more product offerings. SKU growth can be a profitable strategy, but only if it doesn’t outweigh the operational costs or customer satisfaction to get there. 

Tags: warehouse management