Sku Reduction Can Go Too Far
Retailers have gone through massive stockkeeping-unit optimization over the past two years. The goal was to achieve more productive stores. What has really happened is that shoppers are often turning away.
A study by The Nielsen Company found more than half of U.S. consumers are likely to shop elsewhere if they notice a reduced-product selection. Yet, nearly half of retailers indicate continued plans to decrease assortment. These findings were presented at Nielsen’s Consumer 360 conference.
To date, only 7 percent of consumers report noticing a reduction in variety. And, although 42 percent of retailers did decrease assortment in 2009, assortments overall shrunk by only 1 percent. However, looking ahead to the second half of 2010 and 2011, retailers’ strategies call for continued downsizing and then maintaining assortments. Forty percent of retailers told Nielsen they plan to continue to downsize. The target is to slice as much as 10 percent of the SKU’s on the shelf.
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“Reduced assortments are definitely here to stay, and the message to retailers is to choose carefully, when it comes to deciding which products to trim,” said Stuart Taylor, vice president, Custom Analytics, The Nielsen Company. “In many cases, strategically reducing assortment can result in an improved customer experience and greater profitability. Cut the wrong product, however, and the potential customer backlash could be costly.” Seven percent of personal care product shoppers say that when faced with a shelf that doesn’t have what they want, they’ll leave that store. That even means they take their entire shopping basket elsewhere. Consumers do leave if they don’t find a beauty brand or color they want.
Retailers are trying to get better handles on inventory while also making the shopping environment less confusing. And, nearly half of the retailers said they are chopping to make room for more store brands. Nielsen recommends balancing the interests of the retailer, manufacturer and consumer when devising merchandise assortments. “Success in today’s competitive retail market is no longer about having the most products — it’s about finding the right mix of products,” said Taylor. “Retailers should be focused on offering the products their customers want most and making it as easy as possible for their customers to find and purchase those products. The issue really hits home in beauty where shoppers will perceive an assortment as weak if there isn’t variety. The old 20 percent of the mix accounts for 80 percent of sales is so true; but shoppers want to sell hundreds of colors even if they buy the same one time and time again.
People, Places and Things
A few words with Leylha Ahuile, senior multicultural analyst for Mintel in regard to a recent study showing Hispanic women like products and campaigns targeted specifically to them. Many Hispanic women feel underrepresented in the beauty and personal care aisle, Mintel found.
“It can be a very daunting task for companies to hone in on the specific needs of their Hispanic customers. Latinas come in a variety of shades, so a wide range of products must be developed to cater to every pigment and hair type. Hispanic customers often look at bilingual packaging as a way of being acknowledge and respected by a brand, not because they are unable to read English. The lack of Spanish-language packaging has the potential to make these women feel ignored by manufacturers.”
What’s in Store
Beiersdorf Promotes Maurer: Nicolas Maurer, who has helped establish Nivea, Eucerin and Aquaphor in the U.S. skin care market has been promoted to corporate vice president, global business unit for skin care at Beiersdorf.
CVS and Walgreens Come to Agreement: The two drug chains have reached a new agreement in which Walgreens will continue as a participating member of CVS’ pharmacy benefit management network, thus avoiding what many saw as a bloody battle that would emerge between the two powers.