How And Why You Need To Diversify Your Ecommerce Business


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Change is inevitable in business and life. Companies that have gone before us (Blockbuster anyone?) are a reminder of what can happen. These are grim reminders of the dangers that can befall a business if it fails to diversify and adapt. 

Product diversification, which is adding new or modified products and services to your business offerings, can help increase profits and stabilize earnings. It’s like all business ventures, there are risks. 

Here are the facts about product diversification, and whether it is right for you.

What is product diversification?

Product diversification refers to any modification or expansion of your product offerings to increase sales. 

Simply put: More stuff means more sales. 

For example, take The Coca-Cola Company. Although their original coke and diet coke products will be the first to come to mind, they have expanded to offer new coke flavors and other soft drinks such as Sprite and Fanta. They also sell Dasani bottled water. They have expanded their offerings to include a variety of beverages for all tastes. 

This is not the right way to go for all businesses. It may be best to focus on one product at a time. Business owners need to be aware that there is a fine line between being a specialist and not adapting to new markets.

How important is product diversification?

Diversifying your product offerings can help you expand your market reach and increase sales. It’s often essential for survival. 

If your current products are seasonal, new products can provide additional revenue streams and help regulate cash flow. A company that sells fireplace inserts and furnaces may see most of its sales during the fall and winter. The company wouldn’t be able to diversify its product lines without making sure they sell enough during the peak season to keep them going through the slower months. This pressure is relieved by diversifying to include products that sell in the summer.

Diversification is not only a strategy to help your company survive but also a proven way to grow. You can increase the number of products, services, or lines you offer, which will allow you to sell more to your existing customers and convert more people into new customers.

Diversification of products: Types

Concentric diversification

Concentric diversification is the expansion of a product or service line to add new products. An example of concentric diversification is a company that sells winter coats. They might add a lighter, more casual jacket to their product line.

Horizontal diversification

Horizontal diversification is another option. This involves offering a new product or service that is not related to the existing customer and then selling it to them. J. Crew started selling bridesmaids and wedding dresses. They used a horizontal diversification strategy to get into the bridal market.

Conglomerate diversification 

A company may create new products or services that are not similar to the ones they currently offer. This is called conglomerate diversification. General Electric used conglomerate diversification to diversify its business, selling home appliances and medical equipment.

Diversifying your products 

Diversification of products can be very different from one business to the next. The path to product diversification will depend on how much money you have available to launch new products, and how risk you are willing to take. These are the steps you should take to get started.

Take into consideration your goals and strengths 

Before you can take concrete steps to diversify products, it is important to identify your primary goal. Do you want to diversify defensively to defend your business from slow months or other companies? Do you want to take advantage of a new market with new products or diversify defensively? These questions will be the foundation of your strategy. 

Before diversifying, a company must also identify its strengths. Constantinos Markides, a Harvard Business Review writer, said that managers should not focus on what their company does, but on what they do better than others. It forces organizations to think about how they might add value to a newly acquired company or a new market, whether it’s through excellent distribution, creative employees, or superior information transfer knowledge.


The internet makes it easier than ever for you to conduct market research. Consider diversification. Identify potential competitors. Learn as much as you can about their pricing and product offerings. To see how customers react, you can conduct a small market test. You can also analyze your marketing and sales efforts during this test. This will allow you to determine the cost of launching your product so that you can plan accurately. 

Budget, plan, and evaluate resources 

Diversification of product lines can be expensive. To budget appropriately, you will need to evaluate the resources available, such as your sales, marketing, and production teams. You need to determine if your team has the market knowledge and production capabilities to develop the product. If not, you will need to hire additional staff or invest in infrastructure. If internal development is not possible for you, it might be worth looking at other suppliers or licensing products created by other companies. 

Diversifying your products can reap extraordinary rewards, but it doesn’t have to be a difficult task. 

Markides wrote, “Managers should carefully study their cards.” Smart players know when to increase their bets and when to fold.

About the author

Kobe Digital is a unified team of performance marketing, design, and video production experts. Our mastery of these disciplines is what makes us effective. Our ability to integrate them seamlessly is what makes us unique.