How to Categorize Products Efficiently for your online store

When you walk into a store, you instinctively expect signs to guide you through different sections. Also, you expect that the products in the section would be related to the name stated on the sign. Now imagine, you walked into a store to buy a formal shirt. You walked into the section labeled “Shorts”. But there you could only find t-shirts! Sounds dumb, right? Now imagine someone coming into your online store, and facing the same issue. This is something you don’t want your customers to face.  This is where you need proper product categorization.

The proper classification of products on an online store is influential in how customers find what they need. Product categorization (or product hierarchy) is the idea for the way buyers navigate and find out merchandise. It creates a structure to let customers browse merchandise through their attributes. This is the first step to distributing the information about your sellable products across different platforms.

In this blog, we would discuss why product categorization is important, and guide you through the best practices and what you shouldn’t do. Let’s get started with the first step to building a  successful e-commerce enterprise.

What is product categorization?

Product categorization refers to the management of products by sorting them into different categories and subcategories depending on their attributes or related tags. It helps customers intuitively find what they want on your e-commerce site. An unorganized shop may cause you to lose customers who do not want to search too hard for what they`re looking for. But if done right, your conversion rate will increase guaranteed!

Within the category of consumer products, there are four main classifications: 

  • Convenience goods: These are the goods people buy habitually. They often buy them without any prior thinking. Example-  Toothpaste, candy, soap, etc.

  • Shopping goods: People tend to research or explore items before purchasing these kinds of products. This is because these are priced higher or are important to the customer’s lifestyle. Such as laptops, mobile phones, etc.

  • Specialty goods: Consumers usually tend to go to lengths to buy these kinds of products. These products have loyal followers who do not want to change their perspective about the product. For example – luxury cars.

  • Unsought goods: These are types of products people care little about and buy occasionally and these products are bought when only necessary. Battery is a very good example. Very few people know how a battery works, and they do not buy new batteries till they run out.

Understanding these four categories is very important. Categorizing your products in the above-mentioned orders lets your customers find what they need. You would also be able to upsell and cross-sell easily if you categorize and strategize properly.

Why product categorization is important in e-commerce

Product categorization is an important element of e-commerce and marketing. Through the accurate classification of your products, you can increase conversion rates, strengthen your search engine, and improve your site’s Google ranking.

Product categorization is important for commercial enterprise fulfillment for the following reasons

     1. Intuitive buying experience
     2. Product findability
Increased income
Operational efficiency

1. Intuitive Shopping Experience
Product categorization is essential as it streamlines the buying experience. It guarantees traffic to a webshop without problems. Also, reduces the chance of abandoning cart. An excellent navigation menu is a foundation for developing an intuitive shopping experience. 

2. Product Findability
Product categorization creates a map for consumers online. Just just like the signs in a physical grocery or branch shop, consumers realize intuitively in which section to visit discover the product they want. If someone with an intent to buy visits your shop and does not find what they want, they would definitely exit and search elsewhere. You would lose a sale even though you have the product.

3. Increased Sales
With all elements considered, product hierarchy certainly results in extra income. When clients can navigate and discover what they want faster, they are more likely to convert faster. An awful product categorization  – where the merchandise are misplaced or hidden and isn`t intuitive – you`ll keep away from dropping income. 

4. Operational Efficiency
Product hierarchy isn`t essential for consumers only. In the operational backend processes, departments need a robust product categorization. It helps them to track your inventory and lets you process orders easily.
See how LazyChat, a CRM tool, can help you manage your business using a robust product categorization system. 

5. Search Engine Optimization 
Because product categorization affects the shape of your online shop site, it has a widespread effect on SEO. All product pages, classes pages, and navigation tools are indexed. Together, they upload extra access factors from which site visitors can come for your online presence. Product attributes and different statistics, being well-optimized, help your on-web page and off-webpage SEO. 

Ways to perfect your product categorization

Product categorization is mainly choosing the correct department for a product. However, due to the huge volume of products on e-commerce platforms, this process could get complicated. There are many products that could belong to multiple categories.

For example, the item “Men’s Basketball Sneakers” could use the following path and categories: 

Clothing, Shoes & Accessories > Men’s Shoes > Men’s Athletic Shoes

However, it could also follow this path:  

Sporting Goods > Team Sports > Basketball Equipment > Shoes > Men’s Basketball Shoes

There is no correct way to do this. It depends on how you expect customers to search for their needed items. It also depends on which departments you want to have the product available. But you need to choose the department precisely as well.
Creating a well-categorized online shop needs a good strategy. Let us guide you through the steps to create a perfectly categorized e-commerce shop.

  • Step 1: Understand how customers shop.
    It is important to understand the mindset of customers with a buying intent. Decide where the user starts the search when searching for something. Depending on the product you are selling, each category should be tailored accordingly. For example: if you want to sell a shirt, you might want your customers to look into the category “Clothing” first.

  • Step 2: Make a list of your first-level categories. 
    Review your product line and do the first level grouping of products. These primary categories can be shown in a grid or carousel on your home page, or in a top or side menu. These broad categories, like the aisles in a supermarket. 
    For example, Your “Clothing” sections can be divided into casual wear, sportswear, formal wear, underwear, accessories, etc. depending on the variation of your products.

  • Step 3: Decide your second-tier categories.
    Subcategorize each product that belongs to the first-level categories. Subcategories commonly appear as grids on category pages or as dropdown menus from the main category menus. These are similar to the shelves in each aisle of a supermarket. 
    For example, the section “Formal Wear” can be divided into formal shirts, formal pants, formal jackets, formal shoes, etc.

  • Step 4: Select a third-level category and continue as needed.
    You need to divide your second-tier goods into as many subcategories as needed too. For example, the second subcategory “Formal Shoes” can be divided into “Men’s” and  “Women’s”. Continue creating subcategories until you feel that you have placed all your products logically. You can divide the subcategory  “Men’s Formal Shoes”  into oxford shoes, loafers, brogue, etc.

  • Step 5: Assign categories for the backend.
    Examine each item on your inventory list to ensure that it is assigned to at least one category in your backend. On your website, your products should be sorted into as many categories as necessary. Properly categorized products help your after-sales processing easier.


Product categorization levels



If you think that you would be fine because you have created the perfect product categorization for your e-commerce shop, then you are wrong. As we have stated before, product categorization is similar to a map. You need to fine-tune your products every now and then to have a better conversion rate and less abandoned cart ratio. Guided product placement on your online shop helps your customers find their products faster. And the quicker they find their product, the chances of them buying the product increases. Also, as they are getting what they want without having to search thoroughly, their shopping experience is getting enhanced. That means the customer retention rate also increases. If you are not focusing on your product placement, then you must now! 

Simplifying Social Commerce

Improve and grow your business in social media using an all-in-one social commerce tool.

Get Started

More Articles

About the author

Simplify Your Online Business

Subscribe to get the news on awesome new features and latest updates