How to Use the Category Tree, Product Tree, and Shopper Decision Tree to Boost Retail Sales?
A category tree is a category management method that organizes the assortment of products in retail stores. Category managers use the category tree and product tree to structure the assortment efficiently. However, without proper management, an assortment tree can become chaotic, reducing profitability. In this article, we will explore how to correctly build a category tree, how it differs from a product tree and shopper decision tree, and how to automate assortment management using analytical tools.
Category Tree, Product Tree, and Shopper Decision Tree – What’s the Difference?
Although these terms are often used interchangeably, there are key differences:
- Category tree – A hierarchical structure of an assortment designed for efficient management and analysis.
- Product tree – Focuses on grouping products within categories based on their characteristics and substitutability.
- Shopper decision tree – Reflects consumer behavior patterns and preferences when choosing products.
A well-balanced combination of all three approaches allows retailers to create an effective Assortment Matrix, considering the customer journey and key decision-making factors.
How Do Customers Make Purchase Decisions?
In traditional category management, the Customer Decision Tree (CDT) is widely used. This tool helps analyze and understand how customers make purchasing decisions. However, instead of relying on a rigid CDT model, retailers should consider the influence of the shopper decision tree, which reflects real customer needs and helps structure the assortment so that products logically complement each other and drive sales growth.
The category tree can conceptually mirror the shopper decision tree. Consider the example of a customer selecting tea:
- Type of Beverage – Black, green, pu-erh, etc.
- Brand – Lipton, Twinings, Tazo, etc.
- Brewing Method – Loose-leaf (teapot), tea bags (cup), etc.
- Leaf Type – Large, medium, small, fine.
- Additional Characteristics – Pure, flavored, fruit-infused, etc.
By building a category tree, category managers can ensure that customers navigate the store logically, finding exactly what they need.
How to Build a Category Tree?
To structure an assortment effectively, follow these steps:
- Identify Product Categories – The broadest blocks, shaped by the retail format. For example, in a convenience store, they may include “Groceries,” “Beverages,” “Household Goods,” “Personal Care,” etc.
- Group Substitute and Complementary Products – Items within a category decision tree should either be direct substitutes (e.g., spaghetti, farfalle, and penne) or complementary products (e.g., spaghetti and pesto sauce).
- Determine the Category Structure Based on Store Type – There are no universal rules; each case is unique. For example, in a convenience store’s “Facial Skin Care” category, there may be only a cleansing gel and a moisturizer. In a supermarket, toners and eye creams may be added, while a drugstore may also include scrubs, masks, foams, and mousses.
Rules for Structuring the Category Tree
- Limit to five levels of hierarchy – Base it on the product’s purpose by asking: “For whom/what is it designed?” Example: Home textiles – for decoration (napkins, mats), for sleep (bedding, blankets), for bathrooms (towels, waterproof mats). Bedding can further branch into adult vs. children’s, cotton vs. silk, etc.
- Avoid vague categories – Groups such as “Miscellaneous” or “Dead Stock” are ineffective for consumer navigation and sales planning. Instead, create specific subgroups, even if they contain only one SKU.
- Link product attributes to sizes, materials, brands, and styles – This simplifies assortment analysis and helps track category sales trends.
What Benefits Does the Category Tree Provide to Retailers?
A well-structured category tree structure provides the following advantages:
- Enhances shopper navigation – Shoppers find products faster by following a logical path.
- Optimizes category sales – Helps determine how many SKUs should be in each segment.
- Identifies high-demand subsegments – Helps define which products should be prioritized.
- Improves promotional targeting – Helps direct specific offers to increase campaign effectiveness.
- Supports competitive positioning – Identifies competing products and how to strengthen specific brand placements.
- Reduces product cannibalization – Understands how products substitute for each other in the shopping cart.
- Refines assortment strategies – Identifies underperforming products that may still serve a niche audience.
How Often Should the Category Tree Be Updated?
Six key reasons to update the category decision tree:
- Changes in consumer needs and market trends – New products and categories require periodic restructuring.
- Seasonality – Certain categories should be updated before peak seasons.
- Scheduled Updates – Even without major changes, regular reviews (quarterly, semi-annually, or annually) maintain relevance.
- Data Monitoring – Customer feedback and analytics may indicate the need for updates.
- Business Expansion – New product lines or store formats may require an adjusted category tree.
- Competitor Activity – Market shifts may necessitate refinement.
How Does the Category Tree Impact E-commerce?
For online stores, an eCommerce category tree is even more critical than in physical retail. Digital shoppers rely on structured navigation to find products efficiently.
Best Practices for E-commerce Category Tree Optimization
- Align with customer search behavior – Ensure subcategories and filters reflect how users naturally search for products.
- Incorporate shopper decision trees into navigation – Use data-driven insights to position categories and recommendations logically.
- Utilize dynamic filtering and personalization – Based on customer behavior, the system can adapt category visibility and product placement.
- Regularly analyze category sales trends – Identify underperforming segments and refine the structure accordingly.
How Does ABM Assortment Help in This?
The ABM Assortment tool from ABM Cloud helps automate category tree structure optimization and provides a robust analytical framework for retailers.
Key Benefits:
- Dynamic updates – The category tree is continuously refined based on shifting customer behaviors.
- Assortment analysis tools – Helps determine which products should be added or removed.
- Performance tracking – Tracks the success of assortment changes over time.
For example, in the clothing category, ABM Assortment can help assess:
- Whether different price ranges are adequately represented.
- Which clothing styles dominate the category.
- How seasonal shifts impact demand.
- Which customer segments show the highest interest.
By analyzing these factors, retailers can construct a product category tree tailored to market demands. If gaps exist (e.g., a lack of mid-range products), the assortment can be adjusted accordingly.
Conclusion
A well-optimized category tree enhances sales, streamlines inventory management, and improves the customer experience. By integrating customer decision trees with category tree structures, retailers can better align their offerings with consumer preferences, ensuring a more effective assortment strategy for both brick-and-mortar and eCommerce category tree environments.
