What is Product Categorization on a Marketplace and How Can It Be Improved?

If a user can’t find the product they want within 54 seconds, they will move on to another website. Wondering how to keep them engaged and convert them into buyers?

Product categorization is about creating a virtual path for your online shoppers on your e-commerce marketplace.

Most customers who visit your website have high expectations, largely due to platforms like Amazon and eBay.

For example, with 1.9 billion businesses, 28% of Amazon customers complete their purchases in three minutes or less. What’s the main reason for this? Their product category tree. Amazon has its primary, secondary, and tertiary categories arranged in a tree-like structure, branching out according to specifics. This makes it easier for users to navigate, ultimately increasing conversions and sales.

However, studies show that 90% of e-commerce businesses do not categorize their products correctly. If you are one of these sellers, read on.

In this article, we will discuss what product categorization means and how it can be improved.

What Is Product Categorization?

Product categorization, also known as product taxonomy, organizes products into specific, hierarchical categories. Just as consumers walk through physical stores and navigate aisles to find the product they want, categorization allows online marketplaces to create virtual aisles that help consumers locate products more efficiently.

4 Reasons Why Product Categorization Is Essential for Your Marketplace

In addition to higher conversion rates, product categorization offers several other benefits to your marketplace:

1. Improves Customer Experience

The better the customer experience on your marketplace, the more likely they are to return, stay longer, and make more purchases.

Studies show that if a site’s navigation isn’t designed to simplify the user’s journey, a seller loses at least 35% of their sales. Properly categorizing products into different subcategories improves the UX of your marketplace, increases sales, and extends the time users spend on your site.

Users should be able to easily find their desired product in both “top” and “bottom” categories. Always ensure that category branches are linked to the main “all categories” data.

2. Increases Search Engine Rankings

Is your number one goal to increase your online store’s search engine rankings? The answer should be yes. Every marketer should understand that the higher your ranking on Google, the more traffic and conversions you will receive.

Product categorization helps Google rank your site and index pages faster in its search engine results, leading to better visibility and increased organic traffic.

3. Allows You to Make Data-Driven Decisions

Proper product categorization provides insights into what is working and what is not. For example:

• Which products sell the most, and which ones are stagnant?

• How many users are moving from the category page to the purchase page?

• How many users are not moving past the first page of product search results?

• Which categories receive the most views, and which ones show little interest?

Using this data, you can identify issues on your website that hinder sales. For instance:

• Check the architecture of your website, including the layout of categories and subcategories.

• Enable sorting and filtering options on product pages, such as new arrivals and best sellers.

• Experiment with different methods to increase conversions and drive sales.
  

4. Improves Your Operational Processes

From helping your team respond quickly to customer inquiries via chat to properly distributing inventory across your marketplace, product categorization can significantly improve your business’s operational efficiency.

By implementing a well-structured categorization system, you can streamline operations, enhance user experience, boost search rankings, and make data-driven decisions to optimize sales performance.