How Product Bundling Helps Inventory Management

Key takeaways:

• Increased Average Order Value (AOV): Bundling encourages customers to purchase more items at once, leading to higher transaction values.

• Faster Selection and Shipping: Bundles simplify the shopping process for customers and streamline fulfillment for retailers.

• Appeal to Diverse Buyer Types: Bundles attract deal hunters, convenience seekers, and those looking for curated product pairings.

• Overstock Reduction: Bundling helps move slow-selling or excess inventory without heavy discounting.

• Cost Savings: Combining products into one package lowers packaging, storage, and shipping costs.

• Product Discovery: Bundling helps promote new or lesser-known products and see how customers respond.

• Enhanced Customer Satisfaction: Consumers appreciate the added value, convenience, and perceived savings that bundles provide.

What is Product Bundling?

Product bundling, also known as bundle stock or product kits, is a marketing strategy that groups multiple items as a single package or “bundle.” This approach aims to increase sales and customer satisfaction by offering complementary or related items together at a discounted price compared to purchasing each item individually.

One of the most classic examples of bundling can be found on fast food menus. Most fast food restaurants offer individual items on their menu, as well as options that group multiple items into a “meal.” Consumers can purchase a burger, fries, and a drink separately, but the restaurant offers all three together at a discounted price, prompting diners to buy the entire bundle.

Bundling creates value for customers and encourages them to purchase multiple products at once, leading to increased revenue and improved inventory turnover for businesses.

What are the benefits of product bundling?

How Are Products Bundled Together?

Logistically, the sale process of product bundles and kits is the same as that for individual products. Items are grouped together under a single SKU, but inventory should be deducted individually for each item in the bundle when a sale is made.

Bundles are often comprised of items that are typically used together, such as shampoos, conditioners, and body washes, grouped into a single offering. Product kits may also be focused on a particular ingredient or consumer lifestyle, such as creating a kit that includes vegan lotions, vegan face creams, and other vegan items. They can be focused on quantity, theme, brand, or any other factor that might link products together and provide value to the customer. Sellers can even use bundling as a strategy to get rid of weaker or newer stock by pairing them with a top seller.

Types of Product Bundles

Bundling products can occur in many different ways, depending on what advantages they offer and the pricing strategies they fulfill. Here are a few of the most common types of product bundles for retail and e-commerce businesses:

•     Set bundles. Multiple of the same or similar products can be grouped together and sold as a set. For example, people usually need more than one bath towel in their house, so you might combine several towels into a single offering and sell it as a bundle. You could also create a bundle that includes bath towels, hand towels, and washcloths in the same design or style, as many consumers want a matching aesthetic for different towel types in their bathrooms.
•     New product bundles. Bundling new products with popular related items is a great way to promote visibility and boost sales for new products without spending too much on marketing. An example of this would be a video game company pairing a newly released game sequel with the popular original game title to increase sales of the new game.
•     Subscription boxes. Subscription boxes are a very popular type of bundling strategy. Customers sign up for subscriptions to have boxes of merchandise delivered at a regular cadence, which provides a steady stream of revenue for the company. Some subscription boxes are themed, and the particular products are chosen by the business, while others are customizable mix-and-match bundles chosen by the customer.   
•     Mix-and-match bundles. This type of bundle gives customers the option to choose from a curated list of similar products. The technique lets customers feel in control of what is included in their bundle, increasing its perceived value.
•     Cross-sell bundles. Retailers may create bundles that include complementary products or accessories that go with the main item being sold. This typically works best with lower-price add-ons. For example, a cell phone company might sell a phone and a phone case together in a bundle, as most customers will already look to purchase a case for their new phone anyway.
•     Clearance bundles. Clearance bundles are a great way to get rid of excess inventory for a product that isn’t selling well. By pairing a slow-moving item with a popular product at a discount, you can encourage customers who are primarily interested in the top seller to also purchase the less popular item.
•     BOGO bundles. Buy-one-get-one bundles involve selling a main product and offering a discount on a second complementary item. This strategy is great for products that are not typically repeat purchases, like electronics, as it allows you to maximize the average order value. It also works when offering multiple units of the same product to encourage customers to buy more than they normally would—for example, a bundle offering buy-one-get-one half-off for a certain shirt or type of shirt.

Product Bundle Pricing Strategies

Bundle pricing is when multiple products are sold together as a package, often at a lower combined price than if bought separately. It’s a popular e-commerce strategy to increase average order value and move inventory. Here are the main types:

• Pure Bundle Pricing: Products are only available as a set and can’t be purchased individually. This works well for complementary items, like skincare kits or meal boxes.
• Discounted Bundle Pricing: The bundle offers a discount compared to buying each product separately. It encourages customers to buy more while feeling they’re getting a deal.
• Tiered Pricing: Customers can choose from bundles at different price levels (e.g., basic, premium, deluxe). This gives shoppers flexibility and helps businesses target different budgets.
• Gifting Bundles: Curated product sets designed for gifting occasions. These bundles often feature themed packaging and simplified choices to appeal to holiday or special-event shoppers.

How Inventory Planner Can Help Improve Product Bundling

Although product bundling is a great sales strategy, figuring out the right bundles to boost sales and profits without incurring stockouts or causing overstock issues can be challenging if done manually.  This is where a dedicated inventory planning software like Inventory Planner steps in, playing a crucial role in the formation and sale of product bundles.

Inventory Planner intelligently forecasts demand for each SKU based on historical and up-to-date sales data and identifies overstocked and understocked inventory based on forecasted demand. It also tells you how much inventory needs to be reordered and when reordering should happen to avoid stockouts. Plus, it offers 200+ meaningful metrics that help you clearly understand your inventory performance, including your best-sellers, cash-drainers, high-in-profit products, high-in-demand items, and more. With these insights, you can easily pick the right items to be bundled together based on your sales strategy. For instance, you can bundle overstocked items with your best-sellers to quickly release cash and warehouse space from excess inventory.

Once bundles are created, Inventory Planner will forecast customer demand for each bundle and translate it into how much inventory is needed for each bundle component and when each component needs to be replenished. That way, you’ll never overbuy certain components of a bundle while understocking others.

With Inventory Planner’s powerful reporting, you can easily understand how each bundle is performing at both bundle and component levels. This allows you to optimize your bundling strategies that encourage sales T while maintaining healthy profit margins.

With the reliable insights and accurate forecasting provided by Inventory Planner, businesses can make informed decisions about ordering, replenishment, demand, and the formation of new bundle stock offerings to ensure they are maximizing revenue and minimizing inventory holding costs.