Several months ago Wal-Mart Canada Corp. decided to overhaul one of the staples of its grocery business – the peanut butter aisle.
It dropped two of its five lines of peanut butter to free up scarce shelf space for cinnamon spreads. But the decision didn’t cost the retailer a single jar in sales. With fewer selections to browse, customers wound up purchasing more than before.
“Folks can get overwhelmed with too much variety,” said
In a reversal, retailers are now reducing the amount of choice on their shelves. After years of tempting customers with ever expanding arrays of brands, hues, sizes and flavours, they’re racing to simplify their offerings. The recession has encouraged them to focus on top sellers and private labels while throwing marginal products overboard.
Storekeepers are culling their product lines to trim costs, reduce consumer confusion and ultimately boost sales. Reducing the number of products can help companies increase sales by as much as 40 per cent while cutting costs by between 10 and 35 per cent, according to a 2007 study by consultant Bain & Co.
But the process of choosing which products will die can be hit and miss – and retailers risk a customer revolt if they get it wrong. “Even with retailers removing products on the shelf, public pressure can bring them back,” said Liesbeth Teerink, managing director of marketing agency Launch.
Customer feedback was quick when Loblaw Cos. Ltd. recently culled about 10 per cent of weak-performing products from a store in west Toronto. The retailer is now restocking about half those items because customers missed them.
“We knew we’d get probably about half of it wrong,” Loblaw executive chairman Galen Weston told shareholders earlier this month.
While picking the wrong products to dump can lose sales, a growing body of evidence suggests that reducing the number of products on the shelf can improve the overall shopping experience. The average shopper takes just 2.5 seconds looking for an item and notices only half the products on a shelf, according to research by Procter & Gamble Co., the consumer products giant.
P&G, maker of Tide detergent and Ivory soap, recently reduced the number of its soap and other skin care offerings by about one-third at one retailer, while cutting the array of detergents and other fabric care products by about 20 per cent at another chain.
Following the cutbacks, sales grew in each category. “In the skin care example, shoppers reported they felt that they had more choices because the selection on the shelf was clearer,” spokeswoman Jennifer Chelune said.
To help pick the right products to cull, chains such as grocers Loblaw and Metro Inc. and general retailer Canadian Tire Corp. are investing in improved inventory tracking systems and rewards programs to better pinpoint customer preferences.
“There’s a proliferation of SKUs [products, or stock keeping units] in the marketplace,” said Rob Persiko, a director of marketing at household product titan Unilever PLC. It has targeted a 14 per cent reduction in its product offerings, ranging from Dove soap to Lipton soup, over the next couple of years.
“There’s also a lot of confusion when you reach the shelves,” he said. “Consumers have a hard time finding what they’re looking for because there’s so much on the shelf.”
Retailers frown on shoppers having to spend too much time in any one aisle, Mr. Persiko said. “One retailer told me: ‘Help my customers find what they want and get in and out quickly so they can shop the rest of the store.’”
But downsizing can be tricky, as Wal-Mart discovered earlier this year. After abandoning thousands of slow-selling products, ranging from freezer bags to $1 sacks of brown rice, Wal-Mart’s U.S. parent was forced to re-stock about 300 items.
The world’s largest retailer found that some customers turned to rival stores for the bag of rice, for instance, and then did the rest of their $80 shopping trip elsewhere. Now the rice is back, and the rationalization strategy is paying off, chief operating officer Bill Simon said in March. “The vast majority of what was removed was done for the right reasons in the right way and have actually improved the category sales.”
Montreal-based Metro, which has been weeding out soft sellers over the past year partly to make room for more private labels, hired
Its tests found that each category has to be evaluated separately. Reducing the array of slow-growth dairy products such as margarines didn’t hurt their sales, while adding more yogurts to the cooler boosted business in the category, Eric La Fleche, Metro’s chief executive officer, said recently.
Added Mr. Mac Naughton at Wal-Mart: “We’re balancing choice, duplications and cost.”
