Like pulling a muscle during a workout or paying an accountant to prepare your taxes, there are advantages and disadvantages to everything we do. Each decision has its pros and cons, and a key to success in life is weighing them and making the right choice more often than the wrong one.
In the world of eCommerce, brands face tough decisions quite frequently. From navigating supply chain issues to managing storage space to executing order fulfillment, determining what to do and how to do it is no simple task.
In relative terms, the kitting process for merchants is fairly straightforward. Taking a few individual products with multiple SKUs, creating a new SKU for the group, and offering the kit for sale is not difficult. The pluses of kitting generally outweigh the negatives, but each situation is different and eCommerce is far too challenging a game not to consider all the factors involved.
At SkuNexus, we consult with online retailers and design management software systems to help them optimize their backend operations. Here, we will discuss the benefits of kitting as well as touch on a few potential pitfalls.
The Pros of Kitting Products
Kitting can have a wide range of positive impacts on an eCommerce merchant’s business. Let’s begin by looking at the financial benefits.
Financial Impact of Kitting
Businesses that employ kitting can see an increased Average Order Value (AOV). A multi-item kit may offer discounts to the shopper vs. purchasing the products a la carte, but the kit price will still be higher than if only a single item or two was purchased.
In addition, more SKUs can increase sales. Not only can the kit items also be sold individually, but kits can be an extremely effective tool on third-party marketplaces (Amazon, Google, Etsy, etc.). These platforms use a variety of data to fuel their search results, one of them being a merchant’s total number of listings, and creative kitting can help differentiate a brand’s items.
By virtue of shipping multiple products together, costs per item are reduced, both in packing materials as well as shipping costs. Customers are also usually less inclined to return an entire kit due to dissatisfaction with a single element.
Warehouse kitting can reduce costs and streamline operations by decreasing the employee time spent in the fulfillment process. By pre-packing kits, a merchant saves time and money as orders go straight from picking to shipping.
Inventory Management
A great deal is made of the effect kitting can have on a brand’s inventory, particularly when it comes to underperforming items.
By combining products at risk of becoming dead stock with those high in demand, a merchant can potentially liquidate inventory and increase turnover without having to lower prices to an extreme level.
This is certainly an attractive feature of the subscription boxes model, as well. A brand may include less popular products (an unpopular dog toy, for example) with more sought-after items and clear them from inventory in the process.
From an inventory auditing perspective, pre-packed kits can provide an advantage, as well. A single kit may comprise a plethora of items and all will be included in the count.
Warehouse Management & eCommerce Fulfillment
The benefits of kitting extend across the whole of backend operations. In terms of helping with organization, kitted items are grouped together both in their respective parcels (if pre-packed) as well as in the same area of the warehouse. Thus, regardless of the method (pre-packed or not) the merchant uses, the fulfillment process will take less time to complete.
Pre-packing of kits accomplishes multiple goals. In addition to basic organization, it can reduce the number of employees needed to perform fulfillment operations and traffic on the floor in general. And, by having focused workers solely responsible for packing kits before they are needed for order fulfillment, accuracy can be increased and errors lessened through greater attention to detail.
This accuracy can extend to 3PLs (third-party logistics providers) providing kitting services. An outsourced contractor with proven expertise in the field should be able to handle kitting with an error rate as close as possible to zero.
The Cons
There are a few that need to be addressed. These are not catastrophic types of issues, but they can certainly impact a brand’s bottom line and must be mentioned.
In the event of damage/loss, all items in the kit will be impacted. This compounding of a small problem is not insignificant, particularly if the items in question are all individually valuable.
The converse of the inventory management advantage (i.e. grouping poorly-selling products with popular ones) can result in a kit not selling due to the lesser item(s). In this instance, a brand could miss out on sales of individual items that are languishing within the kit.
Supply chain issues can also totally disrupt a brand’s kitting models. If a kit is built upon a particular (irreplaceable) item that is out of stock, the whole kit becomes irrelevant and the other items may then be an inventory burden.
At SkuNexus, we understand the positive impacts that kitting can have on an eCommerce brand, both as a supplement as well as the entire basis of the business model. The array of offerings in the marketplace continues to grow and we look forward to helping brands optimize their operations in this area.
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