Product Taxonomy Automation

The Importance of Product Taxonomy and Best Practices

Matt Payne
November 23, 2022

According to McKinsey, eCommerce sales have jumped 40% since 2021 and show no signs of slowing down. However, there is nuanced consumer sentiment across demographics. For example, Boomers are more likely to pull back on discretionary spending, while higher-income millennials say they plan to continue spending across categories. 

Though the past two years show such consumer outlooks could shift within days. One way for eCommerce companies to remain competitive and scale is by properly categorizing all of their products into a structured product taxonomy.

Whether your eCommerce site has a few dozen items or thousands; it’s easy to see why organizing them in logical order improves the customer experience. Libraries use the Dewey decimal system for classification; successful retailers use product taxonomy. 

Product Taxonomy in eCommerce

Product taxonomy is the system used to organize and classify products in a way that helps customers find what they're looking for, whether it’s women’s dress shoes or kids' shirts. 

Proper product categorization improves site navigation, user experience, and search engine optimization, which leads to increased conversions and sales.

Benefits of a Well-Designed Product Taxonomy for eCommerce Businesses

  • Clear and well-designed taxonomy structure is essential for organizing and navigating large product catalogs. It’s the difference between helping your customers find exactly what they’re looking for and having them hit the back button out of frustration.

  • Relevant and accurate product tags and categories are essential for customer satisfaction and search engine optimization.

  • Regular maintenance and updates of product categories keep the site current. New products, seasonal discounts, and any other changes require frequent updating so your customers have a positive experience.

Consumers find your site via social media channels, organic SEO, paid SEO, and email. No matter where they interact with your brand, they want an easy-to-use shopping experience and personalized recommendations. Product taxonomy makes an omnichannel approach easier. 

Key Insights

  • Definition of product taxonomy
  • The relationship between product data and taxonomy
  • Types of taxonomy and their benefits
  • The importance of product taxonomy for eCommerce businesses
  • The financial benefits of a well-designed product taxonomy
  • Best practices for product taxonomy.

What is Product Taxonomy, and How Does It Work?

Definition and Explanation of Product Taxonomy

Product taxonomy is a method for classifying your products according to their characteristics and relationships. It provides a fundamental order that meets a shopper's expectations. Imagine visiting a physical clothing store with a jumble of clothes in no logical order. Kids, menswear, womenswear, it’s all hanging on racks and piled on tables, but everything is mixed together. You’d probably turn around and leave because who wants to sort through dozens of pieces to see if there’s anything you like? 

That’s what can happen online if your product taxonomy isn’t clear. Product taxonomy sets up a proper hierarchical structure for organizing products and helps customers find what they're looking for. For example, all the women’s walking shoes are together. All the men’s shirts are together.

The Relationship Between Product Data and Taxonomy

Product data such as title, description, price, and tags are used to classify products into their appropriate categories. Taxonomy then provides the structure and rules for categorizing products so people can find things.

Types of Taxonomy and Their Benefits

Hierarchical taxonomy is a tree-like structure with a single parent-child relationship between categories. For example, In eCommerce, women’s walking shoes would be a top-level category, and then you can identify them by style, brand, color, size, and price. 

Faceted taxonomy allows a product to belong to multiple categories and provides a way to filter products based on multiple criteria. That way, if you want to search for red women’s walking sandals in size 6, you can. 

Flat taxonomy uses a single level of categories.This means that you will classify your each product into only one general group, like “shoes” without additional sub-categories (such as “women’s shoes”). These simple taxonomies are best for smaller stores that don’t carry too much inventory. 

Each type of taxonomy has its own benefits and could fit your eCommerce business depending on your specific needs.

The Importance of Product Taxonomy for eCommerce Businesses

Large Product Catalogs With Multiple Categories and Subcategories

A clear and well-designed taxonomy structure is essential for organizing and navigating large product catalogs. Imagine your product catalog includes 20,000 items. Logical taxonomy helps your customers find the products they're looking for and reduces frustration and abandonment. 

If you enable product recommendations, your customers will see other products they may be interested in based on the taxonomy. Think of Amazon’s “customers who bought x, also bought y” recommendations. 

The Need for a Clear and Consistent Taxonomy Structure

A consistent taxonomy structure with clear rules and conventions makes it easier for customers to find what they're looking for, and it helps the eCommerce business to maintain and update the taxonomy efficiently because of established rules. 

The Importance of Relevant and Accurate Product Tags and Categories

Relevant and accurate product tags and categories are essential for customer satisfaction and search engine optimization. If your customer searches for women’s walking sandals on your site, you want them to find those sandals as quickly as possible. 

Using the correct tags and categories also boosts your website’s search results so more people can find your products. 

The Need for Regular Maintenance and Updates to Your Product Categories

As the product catalog grows and changes, the taxonomy needs to be updated and maintained to keep it effective. Ecommerce sites require continuous updating to the taxonomy to support the customers and business needs. Fortunately, you can automate your updates which saves hours of manual work and results in fewer errors. 

The Financial Benefits of a Well-Designed Product Taxonomy

Improved Site Navigation and User Experience Lead to Increased Conversions and Sales

A clear and well-designed taxonomy structure enhances the customer experience. People appreciate browsing in a well-designed shopping layout. They’ll read reviews, make decisions, and you’ll see increased conversions and sales as customers are more likely to complete their purchases because you made it easy for them.

Enhanced Search Engine Optimization Resulting in Increased Organic Traffic and Potential Cost Savings on Paid Advertising

McKinsey expects eCommerce ad spending to grow two to three-fold by 2024. This can strain profit margins, yet, proper product categorization and tags help improve the visibility of products in search results (SEO), which leads to increased organic traffic. By boosting online visibility, you may not need to spend as much on paid traffic.

Best Practices for Product Taxonomy

Creating a Clear and Consistent Taxonomy Structure

Define the categories and subcategories of the taxonomy and establish clear rules and conventions for how products should be categorized. For example, women’s shoes are one category with subcategories by style/price/size.

Ensure that the taxonomy structure is logical and intuitive. It’s logical that all women’s shoes are broken into style categories. It’s not logical that men’s shirts would be included. 

Use Relevant and Accurate Product Tags and Categories

Use keywords and phrases that accurately describe the products and are commonly used by customers in their search queries. Then, regularly review and update the product tags and categories to ensure they remain relevant and accurate.

Keep the Taxonomy Up to Date and Well-Maintained

As the product catalog grows and changes, review and update the taxonomy to ensure it remains effective. Retailers can monitor customer feedback and search data to identify any gaps or inconsistencies in the taxonomy and make any necessary updates.

Yet, manual processes take up a lot of time and are prone to error.

Automated Product Categorization

Use AI and Machine Learning for Efficient and Accurate Categorization

Automating manual tasks out of your eCommerce business is one of the most valuable things you can do when looking to scale your revenue or optimize your current processes to improve margins.

It improves operational efficiency and enhances your customer’s shopping experience.

Automated product categorization uses AI and machine learning algorithms to classify products into the right categories. This is faster and more accurate than manual categorization, especially for large product catalogs. 

Not only does task automation software remove the costs and manual resources required, but it scales to support increased work more efficiently than human resources. Imagine uploading thousands of new products in hours instead of days. Your customers can start buying the products faster. 

The Benefits of Automated Categorization for Large eCommerce Stores

Automated categorization saves time and labor costs, especially for large eCommerce stores with many products. Imagine if a typical retailer spends 5 minutes/task. That doesn’t seem like a lot in the scheme of things, but if you multiply that by dozens of tasks a day, it can add up. Automation can free up hours every day. 

It can also improve the accuracy and consistency of the product taxonomy, leading to better customer satisfaction and search engine optimization.

Final Thoughts

A well-designed product taxonomy is essential for organizing and navigating large product catalogs, improving customer satisfaction, and enhancing search engine optimization. AI-enabled product taxonomy can simplify site updating and put new inventory in front of customers quicker for faster sales. 

Following best practices for product taxonomy can lead to increased conversions and sales, as well as potential cost savings on paid advertising. Additionally, using automated categorization can save time and labor costs as well as improve the accuracy and consistency of the product taxonomy. You’ll also be able to sort by best-selling products so you’ll know more about what your customers want.

Manage Product Taxonomy Trees & Catalogs With AI Product Categorization And Tagging

Retailers who automate their product categorization with AI can save hours weekly, resulting in tremendous cost savings.

In today’s competitive market, the site that provides the best customer experience wins; contact us to see how we can help automate your eCommerce taxonomy.