In e-commerce, product categorization is the process of placing and organizing products into related groups. In essence, product categorization is straightforward but if a retailer has hundreds or thousands of products, it can very quickly get out-of-hand. As well as that, products can belong to several categories, creating a vast number of combinations.
If you look at any product on eBay, you will find examples of product categorization. In the example below, the mini-fridge comes under “Home & Garden > Major Appliances > Refrigerators and Freezers > Mini Fridges.”
Product categorization for e-commerce sets the expectation for how you perceive customers to search for your products. How you organize products can impact sales and revenue as they alter the customer experience.
Importance of product categorization for e-commerce
Studies reveal that 99% of users do not purchase their first visit to your website. Due to a vast amount of digital competition, consumers are becoming comfortable with shopping around and finding the best value. A site with robust navigation and taxonomy helps a customer to find what they need quickly and is an essential component for getting them to come back.
A product categorization strategy ensures a high-quality point of sale navigation.
Product categorization enables your site search engine to return products quicker and more accurately. If you think about how you use a site like Amazon, most people start by searching for a product in the bar at the top.
If people are not searching on your site, they will do so through Google. Over one-third of people will start searching for the products they want via Google. Product categorization helps you build product landing pages for search engine crawlers to index and ensure your items appear in results.
Automating product categorization in e-commerce
A site like Amazon needs to rely on merchants to select their product categories. Sometimes, this is open to interpretation and prone to error. For example, one merchant might consider a t-shirt to be gym wear, whereas another sees it as casual wear.
Thre are over 350 million products on the Amazon platform, meaning they need to have automated tools so as merchants categorize products correctly. Today, after just a few words about the product, the system uses artificial intelligence (AI) to complete the product categorization process. If automation improves accuracy by 1%, that is still 3.5 million products that are now categorized in the right way.
Product categorization helps to create recommendation-based systems. For example, if a customer is interested in an item belonging to Category A, you might know that 99% of customers who purchase, also like items in Category X. Product categorization for e-commerce breaks down products into manageable chunks, allowing for personalized marketing and experiences.
Natural Language Processing
Senior Product Manager at IBM, Zia Mohammad, talks about using natural language classifiers for automating product categorization for e-commerce. The demo app tags product descriptions by analyzing the language, automatically feeding them into the correct categories
The description analysis provides a recommended category and the confidence score associated with it. When companies gather more data, the results become ever more accurate, given the ability to learn from experience.
Consumer experiences dominate 21st-century shopping. Product categorization ensures that customers find what they need and are presented with relevant messages. While manual product organization can work for a small business, large enterprises must look at automating product categorization for e-commerce if they are to provide visitors with what they want.