Bundling complementary products is a great way to build your average order value (AOV), but any venture aimed at increasing the bottom line is not without risk. Whether you’re introducing a new product to the market or trying to cross- and upsell existing products, you may be met with logistics challenges when it comes to forecasting inventory and fulfilling orders. That’s where virtual bundling comes in.
Virtual bundling is the practice of selling multiple products under one listing on your store's website. Unlike physical bundling, it allows you to keep those products separate in your warehouse or fulfillment center for individual sale—allowing you more flexibility to fulfill orders as individual items or sets.
If you’ve never heard of virtual bundling before, it’s likely because it’s increased in popularity as of late through advancements in fulfillment and inventory management technology. Previously, products were sold together in pre-kitted bundles (more on that later), but the benefits of virtual bundling supersede those of pre-kitted bundling.
Getting started with virtual bundling can look a little different from fulfillment provider to provider. And that’s because the technology each provider uses can vary widely. However, at Airhouse—which uses its own custom-built software—you can easily set up a virtual bundle in the Airhouse platform on your own. Remember, a virtual bundle is any two or more products that you think customers would like to buy together (or multiple of). Think complementary products like shampoo and conditioner, dog leashes and collars, or variety packs of flavored beverages.
Once you’ve generated your new SKU, you’ll need to update your ecommerce store to reflect the new bundled purchase option. Now you’re ready for customers to purchase the bundle. Remember, a virtual bundle is not actually packaged together in the warehouse until fulfillment begins. Once a purchase is made with a virtual bundle SKU, your fulfillment provider will pick and pack your products according to this new SKU.
Essentially, virtual bundling allows you greater flexibility in your order management and a simplified way of offering a wider variety of ordering options for customers. It’s a great way to grow AOV and introduce customers to new products.
Another thing to keep in mind is inventory management. Without the proper systems in place, it may be difficult to keep track of inventory when products are being sold and purchased individually and in bundles. At Airhouse, we keep track of all of this for you.
As you can see in this example, there are 1,000 chocolate bars available for individual purchase and 500 chocolate bars to be purchased in a two-pack. This level of automation is essential for planning and forecasting.
Selling more products and driving higher order value is always the goal of any successful DTC brand. And by bundling products on your website, customers will be exposed to a wider variety of items. Plus, you’ll have a unique opportunity to highlight how some products work better together, like face wash and moisturizer, for example.
It’s also a great tactic to offer items at a discounted price (when purchased together) or in such a way that a competitor can’t offer. If you’re able to increase the perceived value of your product, then your virtual bundling is a success.
Some other major benefits of virtual bundling include:
Up until this point, we’ve only discussed virtual bundling, but it’s important to note that there’s another type of product bundling: pre-kitted bundling. For a long time, this was the only bundling method available. The primary difference between the two is that pre-kitted bundling sees multiple complementary products physically packaged together, so they can only be sold as a set. Although the difference is slight, pre-kitted bundles have limitations that virtual bundles do not.
With pre-kitted bundles, sellers would typically have to choose which products would be bundled together prior to fulfillment and send those pre-bundled items to the warehouse. Alternatively, some sellers might have their fulfillment provider build these bundles in the warehouse or fulfillment center (a process known as kitting) and create a unique SKU for them. Either way, the bundle is packaged together prior to being purchased online.
Unlike virtual bundling, pre-kitted bundling can be costly and time-consuming. The major limitations of pre-kitted bundling include:
A successful virtual bundling strategy is both an art and a science. Of course, there’s a lot of thought involved in bundling products that you think will sell better together. By quickly assigning virtual SKUs to new bundles, you can easily A/B test which combination of products is more popular together. Moreover, you can create a larger perceived variety of options for your customers.
Let’s say you’re a beverage company that sells multiple flavors of energy drinks. You can test a mix of flavor bundles that can be changed at different times of the year like holidays or back to school. The novelty of a new flavor pack, even if it’s a similar assortment as the last flavor pack, might entice some customers to buy sooner than they would have without the new spin on the product. Or, they might be more inclined to buy a bundle with one new flavor than a four-pack of that new flavor (in case they don’t like it).
Long story short, virtual bundling can be adjusted quickly and with little impact on your inventory management. Have fun with it.
For brand owners who fulfill with Amazon, there’s a virtual bundling tool you can use. As of September 2020, you can create virtual bundles made up of two to five complementary ASINs which are purchased together from a single detail page. This eliminates the need for pre-kitted bundling prior to shipping to the Amazon warehouse.
For more information on fulfilling with Amazon or a DTC fulfillment provider, check out our blog: Is Amazon or DTC fulfillment better for your ecommerce business?