Why is a solid taxonomy important for digital commerce? Because without it, you are not optimizing your channel performance, you are compromising your user experience, and you are destroying the potential for more advanced AI-driven recommendations. In other words, you are leaving money on the table.  So let’s dive into taxonomies to understand how a great taxonomy can transform your eCommerce business.

At its core, a taxonomy is defined as a “knowledge organization system” that rigorously groups things based on shared characteristics and/or shared functions. It not only provides a clear definition of categories, it articulates what qualifies as membership in each category. And in the world of modern retail, a great taxonomy underpinning your eCommerce platform can be the catalyst that moves your sales performance from good to great.

You may be thinking that your current organizational system is robust enough. But are you sure? Here are 3 questions that can help you quickly determine if you have a good taxonomy:

1. Are all the products within each category functionally equivalent?
2. Do all the products within each category have roughly the same set of attributes?
3. Are all the items at the same “level” of assembly?

If you cannot quickly and confidently respond with a “Yes” to all three of those questions, I guarantee you are losing potential revenue. And you are not alone.

We have found that too many companies have rudimentary or inconsistent ways of organizing and classifying products in their database(s). And even if there are specific product specs captured in some fields, other important classifications, such as how a product is actually used, are absent. In addition, a recent study by the Baymard Institute found that 75% of their benchmark sites actually over-categorize their merchandise, which can create product search results that are too narrow in focus and can cause customers to abandon the entire experience.

In contrast, a robust taxonomy provides an intentional hierarchy of product information that can be incredibly powerful to increase customer basket sizes, reduce returns, and increase customer satisfaction.  Specifically:

• Recommendations/Cross-selling – a robust taxonomy clarifies which products naturally complement one another and/or are needed for a more complete product solution.  For the customer experience, this means that other products you present/offer during the shopping experience will be hyper-relevant to how the product is used, not just examples of what other people have purchased from elsewhere in your store (which is how most recommendation engines are powered).
• Configuration – some retailers sell components that are ultimately meant for larger product solutions. Configurators that are used by a single manufacturer (i.e. building a new Mustang on ford.com) are essential not only because each choice is related to other choices in the process, but also because you cannot purchase any part of the car without building a final product.  But in many instances, consumers can build their own solutions utilizing pieces and parts from different manufacturers.  A strong taxonomy is the backbone that allows a configurator to understand which parts will be compatible and which will not.  Without this information, one of two things happen: 1) consumers can inadvertently build a solution that doesn’t work, leading to frustration and higher levels of returns; or 2) they end up buying components from across different stores as they put their solution together – which means you’re losing sales to other sites.
• Discovery – the problem with endless aisles is just that – it can be overwhelming for consumers trying to wade through an overwhelming selection of options.  Information stored in a taxonomy can help guide customers in the discovery process by allowing retailers to present how a product may be best suited to meet a customer’s specific needs, whether based on application (product-usage), other products they are considering (product-product), or how others have utilized it (product-person).  This would not be possible without a taxonomy behind the data.  A strong taxonomy is also the key to providing robust facet-based search; without consistent attributes and a clean, consistent set of attribute values, a faceted search experience will be poor, which will hinder product discovery and/or frustrate your online shoppers.
• Scalability – with a taxonomy underpinning an eCommerce platform, new products can easily be added to inventory and immediately be integrated into the system as a valid compliment, replacement, or alternative to every other product in the database.  Truly headless eCommerce is achieved as there is no need to change anything on the front end.
• Loyalty – If there is a robust taxonomy powering your eCommerce, you will be able to help customers not only understand how things work together in their current session, but also share compatibility with anything they have purchased from you in the past.  A cyclist looking for a new rear derailleur would want to know whether it was compatible with the cassette they purchased last week, for example.  They won’t have to guess, because you’ll already know.

Moving forward, Machine Learning/AI will be driving much of the growth in digital commerce, as it aids in shopper discovery and helps shoppers to understand uses (intent). But without a good taxonomy as the foundation, Machine Learning is unnecessarily more computationally expensive and its results aren’t nearly as effective.  The poor organization present on ~95% of eCommerce sites is the equivalent of having your customers look through a pair of binoculars smeared with vaseline – they can kind of see a few things, but it’s a very blurry picture. Adding a well-designed taxonomy with comprehensive and accurate product attribution will bring the picture into focus, helping powering highly precise recommendations and allowing your customers to find what they want much more easily.

Whether you are a small retailer selling individual products from several manufacturers, or a large enterprise brand looking to provide the best customer experience across all of your products and services, organizing your product data in a robust taxonomy is a proven way to transform your customer experience and increase sales to delighted customers.

Tim Baynes is the Founder and CEO of Compatio, which specializes in helping companies and industries build taxonomies and providing the best knowledge-based tools to power incredible eCommerce experiences.  

SPECIAL OFFER: We offer a limited number of categorization audits for retail sites every month – please contact us directly at [email protected] to apply for one of our 45 minute sessions.  Please provide your name, title, company, website address, and industry and someone will get back to you shortly.