Product Bundling: How Brands and Consumers Benefit

Product bundling has become an effective strategy for brands to boost sales, increase margins and offer great value to consumers. Along with most everything else, the cost of doing business has increased significantly in recent years across fulfillment activities, from transportation to labor to packing materials. To counteract these higher costs, retailers are discovering that increasing the number of units per order through bundled offerings helps drive revenue, keeps inventory moving, and creates a win-win situation for them and their customers.

The global market for beauty and personal care products generated a revenue of approximately $42.5 billion in 2022. Among all segments of the beauty market, cosmetics showed the highest growth rate and is expected to double current revenue by 2027. In 2023, nearly 900 million people worldwide purchased beauty products online, and this number is expected to exceed 1.2 billion by 2027.

Beauty brands especially stand to gain from bundled offerings online. The subjective nature of beauty products lends to highly customizable shopping experiences, often imperative when it comes to encouraging consumers to add more items to their cart. For example, a customer purchasing a lip gloss and an eyebrow product could be tempted to purchase product for their cheeks as well (i.e., highlighter, blush, etc.) – bonus points if they get to choose their preferred shade. The customer benefits from a nice discount overall, and the cart is a third fuller than it was before. Win-win.

What are the benefits for brands?

• Increased Sales: By offering complimentary or related products in a bundle, brands can entice customers to make a purchase they may not have considered otherwise.
• Margin Expansion: Bundling enables brands to leverage higher units per order, leading to increased average order value (AOV) and improved profit margins. Offering bundled products at a slightly discounted price can encourage customers to spend more, resulting in higher revenue and profitability. 
• Inventory Management: By encouraging bundling on slow-moving or excess inventory with popular items, brands can clear out stock before a product goes out of style, or out of date. This reduces storage costs, minimizes waste, and optimizes overall supply chain management.

How does product bundling benefit consumers?

• Value for Money: By combining complementary products, brands are offering customers more for their money and allowing them to try new products at a lower cost, lending to a more rewarding shopping experience.
• Convenience: You are saving consumers time by providing them with a curated selection of products that fulfill their needs, often delivered in a neatly packaged set for an enhanced experience. This has the added benefit of streamlining the shopping process and enhancing customer satisfaction.
• Discoverability: Bundling introduces consumers to new products they may not have been aware of otherwise. By including lesser-known or niche products in a bundle, brands can increase their exposure and encourage customers to explore a wider range of the collection.

What are the operational requirements for successful product bundling?

Strategic product selection: It is important that brands are strategic about bundles. During busy peak periods, for example, it often makes sense to offer pre-kitted bundles, gift sets, etc. to help with speed of fulfillment. However, kit-to-order offerings can create a more personalized shopping experience. This allows customers to easily select the product mix that is perfect for them. Narrowing the offering to select products to choose from helps simplify the decision-making process for the customer while also allowing the DC to plan ahead for an optimal operational flow.

Seamless inventory management and clear communication: Brands must ensure they have ample stock to meet demand for each product offered. Successfully processing bundles requires highly efficient inventory management. Real-time inventory tracking and forecasting tools can help optimize stock levels and prevent stockouts or overstock situations. Additionally, an advanced WMS should be able to systematically route picking activity throughout the DC in a manner that prioritizes efficiency and accuracy during fulfillment.

Value for money: Brands must effectively communicate the benefits of the bundled offering to consumers through clear and persuasive marketing messages. Highlighting the value proposition, savings, and convenience of the bundle can help drive customer interest and generate sales. Social media and influencer marketing has a huge part to play here. This holiday season there has been significant emphasis on the beauty advent calendar with significant savings incentivizing customers to buy.

Streamlined Order Fulfillment: To support bundles, brands must have streamlined order fulfillment processes in place. This includes efficient packaging, accurate tracking, and timely delivery. Ensuring a smooth customer experience from purchase to delivery is crucial to building trust and encouraging repeat business. Brands must ensure that what the customer receives upon delivery matches up to their online shopping experience. There’s nothing more disappointing than being excited about a delivery after a great online checkout, only for your items to arrive poorly packaged, with incorrect products, or at worst, damaged. A well-thought-out packout process is essential to success.

Cost-Efficient Shipping:  To combat the rising cost of transportation, many brands are focusing on increasing the number of products shipped per order. By driving basket size, brands can reduce the cost per item shipped. This approach not only helps to reduce shipping costs, but it can also drive profit by increasing the overall value of each order. By offering incentives such as free shipping for orders over a certain value, brands can encourage customers to purchase more items per order, ultimately increasing revenue and profitability.

Unlock the benefits of product bundling

By leveraging the power of bundled deals, customizable options, and gift sets, brands can increase sales, drive margins, and manage inventory effectively. Simultaneously, consumers enjoy great value for money, convenience, and the opportunity to discover new products from their favorite brands.

To support successful bundling strategies, brands must carefully select products, implement effective pricing strategies, manage inventory efficiently, communicate clearly with customers, and streamline order fulfillment, this is where partnering with a proven 3PL provider can make all the difference. With these operational requirements in place, brands can unlock the full benefits of product bundling while delighting consumers and encouraging loyalty.