18 June 2010

Reducing Assortment

In the past year or so you may have read about retailers “reducing assortment”, which in English means taking some brands and products off their shelves. You may also have heard about Walmart’s Project Impact, which sought to de-clutter their stores of signage as well as low-velocity SKUs. All retailers are doing this to some extent, so watch out, because if you really like Brand X, it might be gone when the store you shop reduces their assortment.

Why reduce assortment?

Why do this? Retailers say it makes shopping easier for their customers. In an interview with MediaPost this week, Stuart Taylor, VP/Customer Analytics for Nielsen, highlighted the ease-of-shopping rationale, saying 60% of the retail chains they surveyed “are doing it to reduce shopper confusion.” Research would seem to back him up. In comments to analysts last year, P&G’s then-CEO, A.G. Lafley, cited store tests where reduced assortment had no negative impact on sales or consumers’ sense of variety. In fact, he said, consumers believed they had more choices. I don’t doubt his research.

Real-world experience, however, hasn’t been so rosy. The most recent press about reducing assortment has focused on the consumer backlash. What? You mean I can’t buy Ben & Jerry’s here anymore? Walmart shoppers loyal to a delisted brand would have to complete their shopping trip at Target.

Reduce this!

Taylor admits in the interview that “as variety goes down, sales go down, too.” He’s not the only one to have noticed this correlation, which is why you’re hearing about retailers reconsidering reducing assortment.

It’s important, though, not to overlook Taylor’s bit of analysis on why sales went down. “Instead of thinking of this just as a cost puzzle,” he advises, “we need to bring the consumer into the picture.” (Maybe he's read this, this and this.)

Don't kill the golden goose

My observation is that retailers focused less on consumer choices and more on which manufacturers would give them the best deals. Buyers know that if you tell four brands you are only going to accept two of them, you'll start a negotiation where at least one of the winners reduces price.

The case for reducing confusion and streamlining store operations is a good one. If it’s strictly financially-driven, however, it won’t benefit anyone.


  1. Maybe no one should stock shelves after reading 'Paradox of Choice'...

  2. Assortment reduction as a wake-up call.

    New products must be innovative, relevant (address consumer needs/wants) and appeal to new or unique shopper segments in a category. Marketers have taken their eye off the ball. Too much of the product proliferation of the last 10 years were about garnering additional shelf space.

    Retailers have focused on reducing inventory costs and improving the turns and margins of products offered oon their shelves. Sometimes overlooking the shopper. For some retailers tha reduced assortment has been believed to improve shop-ability of categories.

    Two responses to this wake-up call are worth noting:

    1) Small brands and/or niche products have taken more innovative appraoches to launching and supporting their products. The have been altering their marketing mix--less emphasis on the traditional mix, and more use of online and social media. Today's challenge with all of the adjustments shoppers have made to their shopping rituals, is to make the "shopping list". Online and social media have been important parts of this.

    2) Retailers have developed "store-specific" appraoches to assortment. Much more representative of shoppers' needs and wants, and allows the retailer to achieve efficient assortment at a local level, while being less likely to drive shoppers to another retailer.