What is product categorization in marketplaces & how to improve it

Product categorization is the backbone of a smooth online shopping experience. Whether you’re selling on a third-party marketplace like Amazon or running your own webshop, how you organize products directly impacts conversions.

In fact, proper eCommerce product categorization not only helps shoppers find items faster but also improves SEO, streamlines operations, and drives more sales.
In this article, you’ll learn:

• How marketplaces use product categorization to boost sales

• Best practices for categorizing products in your own webshop

• Real-world examples from brands like Amazon and Dr. Jart+

• Tools that simplify categorization with automation

Key takeaways

• Product categorization creates clear “virtual aisles” that make shopping effortless

• A strong category structure improves SEO and customer experience

• Both marketplaces and webshops benefit from testing and optimizing categories

• Tools like Channable’s product smart categorization save hours of manual work

What is product categorization?

Product categorization (or taxonomy) is the process of organizing products into logical, hierarchical groups. This includes things such as product type (e.g. apparel, home goods), features (e.g. color, size, material), or product uses (e.g. sports, equipment). Product categorization allows you to create a structured and searchable system of your products online.

• In marketplaces: (e.g., Amazon, eBay): Categories follow strict predefined structures. Sellers must map products to the right marketplace category so they appear in relevant searches.

• In your webshop: You have full control over category trees, navigation menus, and filters. The goal is to balance clarity with depth helping customers find what they need in seconds.

Think of it like a physical store: aisles for groceries, shelves for snacks, and bins for chips. Online, these “aisles” are your product categories.

Example: Dr. Jart+
Dr. Jart+ categorizes products in three ways:

1. By collection (e.g., Cicapair, Ceramidin)

2. By concern (e.g., redness, hydration)

3. By product type (e.g., creams, masks)

This multi-dimensional categorization ensures customers find products whether they shop by problem, preference, or product type. This is a pretty powerful example of tailoring your taxonomy towards your customer behavior.

Why product categorization matters

1. Improves user experience

Confusing menus = lost sales. A Baymard study shows poor navigation causes 35% of lost sales. Clear categories help shoppers navigate faster which in turn helps boost your retention.

2. Increases search engine rankings

Google rewards structured sites. More specific categories create indexable pages for both short-tail and long-tail keywords, improving organic rankings.

As Hilary Basch, UX Designer at Tank, puts it: “Being specific in your navigation encourages Google to route searches to your website.”

3. Enables data-driven decisions

Tracking by category reveals:

• Top-selling vs. underperforming categories

• Drop-off rates on category pages

• Conversion paths from category → checkout

This data highlights where to optimize menus, filters, and product placements.

4. Streamlines operations

Proper categorization improves:

• Inventory management

• Customer support queries

• Distribution planning across marketplaces

5 ways to improve eCommerce product categorization

1. Define clear product attributes

Start by listing product attributes:

• Example: “Brown faux leather jacket” → Color: Brown, Material: Faux Leather, Category: Jackets

• Avoid duplicate categories (e.g. “Skincare” vs. “Face Products”)

• Keep main categories between 8–10 for clarity

2. Learn from marketplaces & competitors

Amazon’s product tree is legendary: clear, multi-layered, and exhaustive. Study how leading marketplaces in your niche structure categories.

Example: Sephora’s “Gifts” menu includes subcategories by price range, addressing shopper intent directly.

3. Prioritize mobile optimization

With mobile sales forecasted to hit $700B+ by 2025, menus must be easy to navigate on small screens. Test hierarchy depth, scrolling behavior, and filter placement on mobile devices.

4. Update categories regularly

• Monitor Google search queries for emerging subcategories

• Create seasonal categories (e.g., Holiday Gifts, Summer Essentials)

• Add trending product types to capture evolving demand

5. Test & optimize constantly

Metrics to track:

• Click-through rate (CTR)

• Time on category pages

• Bounce rate

• Conversion rate per category

Test adjustments like:

• Category names (e.g. “Formal Shoes” vs. “Court Shoes”)

• Placement in the navigation bar

• Filters and sorting options

Marketplace product categorization challenges

When selling on marketplaces like Amazon or eBay, the categorization process tends to be stricter as:

• Products must match the correct predefined category

• Incorrect mapping can cause listing rejections or low visibility

• Large catalogs make manual mapping inefficient

This is where automation becomes essential and using a tool like Channable helps to organize, structure, and present your products online.

Automating product categorization

Manually categorizing thousands of products is slow and error-prone. A solution like Channable’s AI product categorization automates the process:

• Instantly maps products to the correct marketplace categories

• Works across 2,500+ sales channels

• Updates categories automatically when attributes change

• Maintains 97% categorization accuracy

Save time and avoid errors with Channable’s AI product categorization.

FAQs

What is product categorization in eCommerce?

Product categorization is the process of organizing products into logical groups so customers can find items faster.

Why is product categorization important for marketplaces?

Product categorization is important because it ensures products appear in the right search results, improving visibility and conversions.

How can I improve my webshop’s categories?

Define clear product attributes, reduce clutter, test navigation, and update categories based on customer behavior.

Can product categorization help SEO?

Yes. More specific categories create indexable pages, boosting rankings for relevant keywords.

Whether you’re running your own webshop or selling on third-party marketplaces, eCommerce product categorization is a revenue driver, not just a UX choice.

A clear category structure improves discoverability, boosts SEO, and creates a frictionless shopping journey. And with tools like Channable’s AI product categorization, you can automate the process and scale faster.