Inventory optimization can be challenging at times. Even seasoned Purchase Managers struggle to create informed inventory strategies. It may seem strange, but small changes can have a huge impact on what customers buy. For example, a liquor store may increase sales of a local whiskey if they display it on its own stand versus in the middle of an aisle shelf. If you’re not constantly optimizing your business for a higher conversion rate, you’re leaving money on the table.
Whether you realize it or not, you are regularly exposed to multivariate testing in your daily life. Large corporations, like Netflix and Amazon, use these techniques to increase engagement and measure success.
Large and small companies alike use A/B testing to inform inventory and business decisions that increase store sales. It’s simple to understand and easy to implement into any aspect of your business.
What is A/B Testing in Retail and E-Commerce?
At its core, A/B testing, or split testing, is simply trying out two different tactics to reach the same goal, like driving increased sales, then measuring the results.
A/B testing is common in e-commerce to increase ad conversion and website purchases. However, retail split testing can increase the in-store shopping experience by drawing more traffic, attention to specific products, and increasing average ticket values.
Why Should I be A/B Testing?
A/B testing can improve the customer’s buying experience leading to more sales. Happy customers mean a higher click-through conversion, increased revenue, and greater loyalty.
A/B testing pits product variations against each other to eliminate products or strategies that aren’t effective. That way you can maximize profits and conversion rates on the items you do sell. It’s not just about raising or lowering prices. It’s analyzing your inventory as a whole so you can reach your key performance indicator goals based on data, not intuition.
Shelf space is a precious commodity. A product should have to earn its spot in your inventory. If sales for one product go down, it may be time to A/B test it to see if it gets a spot on your next purchase order.
It also gives you the freedom to experiment. If you’re taking a risk on a different product brand, you can know whether that risk paid off in outperforming the inventory that was already there.
When it comes to inventory management, an ethos of split testing will ensure you are always in sync with your customers and your products are optimized to sell at the ideal price point.
More Benefits to A/B Testing
Easy, free way to improve sales, marketing, and inventory business goals
Turns ideas into measurable strategy
Informs inventory re-ordering decisions
Visibility on slow moving products that either need a new strategy or to be replaced by more profitable ones
Greater insight on how your business operates
Insight on what strategies work well with your customer base
Highlights products you should invest more in
Improve ROAS for e-commerce
When Should I Use an A/B Test?
Conducting a random split test is never a good idea. It inevitably means that you’re spending unnecessary time testing certain aspects that won’t translate to an increase in sales.
Before A/B testing, it’s essential to have a plan. This guide is intended to help you identify products or areas to split test, give examples of testing strategies, and how to get started and measure the results of your test.
What Should I A/B Test?
Slow moving products by physical store location or sales channel
Product and promotion verbiage
In-store layout and product merchandising
Retail A/B Testing
Recommended Retail A/B Tests
Product Placement: The way you display products in your store can substantially increase conversion. Try A/B testing the same product in two different locations, such as the checkout counter vs an aisle, and see if one drives more sales.
Product Options: Let’s say I own a liquor store and carry wine. I have a couple of upscale Pinot Noirs that sell for around $20, a couple mid-range bottles that sell close to $12, and bargain bottles for under $8. You can try removing the mid-range bottles and see if that leads to more upscale or bargain bottle purchases.
If more upscale bottles are sold you may consider removing the mid-range products if your profits increase. On the other hand, if more budget bottles sold it might be best for your profit margins to add the mid-range bottles back into your inventory.
Pricing: There are several ways you can A/B test pricing strategies. See how increasing the price for upscale options affects sales. Does it continue to sell just because it’s the ‘premium’ option?
Another A/B test is raising the price of a product by 10% to see if it increases profitability without affecting sales. Or you could try raising it to 20% and even though it might negatively affect sales, maybe the increased margins will more than make up the difference.
In-Store Signage: Track how different discount language impacts store traffic. One sale promote “20% off” then the next use “$20 off of $100 or more” to see what resonates better with your customers.
Opening Hours: Experiment with what hours your store is open to see how it affects sales, staffing schedules, and traffic.
E-Commerce A/B Testing
Online retailers use A/B testing constantly to optimize website leads and conversion rates. You can both split test your website’s product pages as well as any online ads, such as Google Shopping Ads, you’re running. A/B testing can bring to light significant optimizations for average order value, add to cart rates and conversion to checkout of site visitors.
While you can apply some of the pricing A/B tests explained above, you can also split test different ways to increase the online user experience.
A/B Testing for Product Landing Pages and Online Ads
Copy for the title, description, call to action button, or details
Leading product image
Social proof (testimonials, reviews, etc)
Tools for A/B Testing
The best thing about A/B testing is that you can do it for free as long as you have accurate sales data. This is where software comes into play. Whether you run a warehouse with 10,000 skus or a corner retail store with a few hundred items, data-driven decisions make businesses more profitable.
Reporting
Having robust reporting software, like Thrive Inventory, is a must for gathering and analyzing the data you need, affordably. Through A/B tests and a powerful reporting platform, you can get the right data in seconds, instead of hours, and make strategic decisions with confidence.
Security
By using A/B testing, retailers and e-commerce businesses can identify and reduce their risk of security breaches. With Evolve Security’s comprehensive services, businesses can uncover more vulnerabilities and benefit from expert guidance to ensure their product and customer data are secure. With the help of Evolve Security, businesses can take proactive steps to protect their customers and their bottom line.
How Long Should You Run An A/B Test?
We recommend running the control group and the variant test for a month each. That might mean testing a product’s regular price for one month, then testing a price increase for another month.
After gathering a month of data for each test variation, you can view sales reports for each timeframe to determine which method was more successful.
It’s also important to plan your tests around major holidays and shopping days so that data doesn’t sku your results. For example, it wouldn’t be a good idea for a liquor store to test wine prices over Thanksgiving because sales will be high that week regardless.
What Happens If My A/B Test Doesn’t Have A Clear Winner?
Let’s say you stock a bottle of cherry vodka that hasn’t moved in 3 months. You try A/B testing the location of the product in your store to make it more visible. If, after split testing locations, your sales data remains about the same, you may want to try another strategy, like pricing.
It is possible that after A/B testing a few different ideas that a product still won’t sell. If that is the case, it’s best to place a big discount on that product to get it out the door and make room for more profitable ones.
Power Up Your Retail Store
Learn more strategies and tools to grow your retail store, like cycle counting and inventory valuation reporting.Â
Key Tips For A Successful A/B Test
Set clear goals for each A/B test that you can accurately report on using sales and inventory data.
Only run one test at a time per product. For example, don’t test a price change and a new image on an e-commerce product page at once. Then you won’t be able to attribute success to the appropriate strategy.
Ensure your testing is consistent.
Don’t assume that what works for one product applies to another. Different products can have unique target audiences or purposes. It’s best to run an A/B test first instead of guessing.
Having a stock forecasting tool, such as Thrive Inventory’s, will help you manage re-ordering since products may start moving at a different rate than you’re used to.
Never stop testing.
