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Yes, from an SEO point of view using natural names in URL's is better. That is for two reasons:
If you have a more or less fixed set of products in your shop then I would recommend changing it. But if you constantly add new, and remove old, then not. The reason is that each time you change a URL it has to be redirected (although Shopify usually do this automatically) and reindexed. Also you will loose a bit of value from external links to previous URL-versions.
Variants is another (and long) story. To put it short - the default way Shopify handle variants is, from an SEO point of view, far from optimal. But what solution you then chose greatly depend on your types of products, how prospects search for them and not the least what kind of development resources you have available. So there is no canned solution for this that will be perfect for all. It depends ...
I know, I also hate those "it depends" answers but it's just often the case - not the least when it comes to SEO-strategies.
Thanks for the response, you are only confirming my suspicions about variants and SEO.
The variants are static, in that the colours and descriptions don't change, however my impression is that having 100 pots of paint listed individually has to be better than them all having the same product handle ?
This is an accepted solution.
If you should optimize product variants or not depends on how different they are and how much prospects search directly for them.
When it comes to "paint" there are many searches for color variants - but even more for types of paint (chalk, acrylic, metal etc.), how they can be applied and where (car, outdoor, furniture, floor, body etc.).
So I would start out by mapping out all the relevant categories and set up collection/landing pages for that.
For the colors you can either set them up as individual products or optimize the variant system (which do require some programming). In either case you need unique TITLE's and descriptions for each color - you can't just replace the color name, which is a lot of work and can be difficult with products so much alike.