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One of the current retailing mantras is that consumers are demanding more choice. We hear this all of the time from companies urging us to add their latest SKUs, from equipment suppliers telling us how the latest gadget or department will grow comp-store sales, and from consumer experts telling us how demanding consumers have become in the Internet age.
But the reality is that consumers don't really want variety -- they just want to be able to get the things that they want.
The difference is subtle but important. What it means to us as retailers is that we constantly need to be searching out the specific products, sizes, flavors, packages, and variations that our consumers want. But at the same time, it also means we need to be mindful that simply adding more options isn't particularly helpful. Indeed, variety for variety's sake doesn't help consumers at all; it drives them crazy trying to find the thing they want in the morass of options.
Dr. Barry Schwartz of Swarthmore College has written a fascinating book on this subject, in an entirely different context. In "The Paradox of Choice: Why More is Less," Schwartz writes about the effect of increased choice in public policy, and why giving people more choices only serves to confuse and anger them.
He shows us how health care consumers hate being made to choose among plans, doctors, and the many other options involved. In fact, he attributes the large number of uninsured people at least partially to consumer resistance to deciding among unclear options. This phenomenon is evident when we see how few seniors have selected one of the new Medicare-funded prescription drug plans, despite the savings they'll earn by having one.
Schwartz encounters this phenomenon again in retirement investing. He attributes a significant amount of the decline in participation in retirement plans to a resistance rooted in a sense of panic associated with needing to choose from among too many investment options.
So how does this affect us in the grocery business? The answer is simple, but the ramifications of that answer aren't.
My juice of choice is Ocean Spray Cranberry Juice Cocktail in the half-gallon rectangular bottle. I don't want the quart or the gallon. I don't want the "100% juice" version. I don't want Cran-Apple, Cran-Grape, or Cran-anything else. I don't want single-serve boxes.
It annoys me that I have to spend so much time looking at the many varieties on the shelf to find the item I want. And it annoys me even more that sometimes the store is out of stock on my item, because it has to have 50 or so SKUs of cranberry juice jammed into four feet, and sometimes that means my juice is AWOL.
So if my supermarket operator were listening to me, it would have a one-foot cranberry juice set with lots of my favorite SKU only. But, of course, I don't speak for all of mankind -- and this is where the challenge gets harder.
Instead of focusing their attention on providing variety, retailers need to understand their consumers, and by that I mean understand exactly who wants exactly what.
And beyond that, exactly how important is SKU X to consumer Y, and, for that matter, how important is consumer Y to my bottom line? If I'm spending $500 per week in your store, and I'm indifferent to discounting, and I'll only accept Ocean Spray Cranberry Juice Cocktail in the half-gallon rectangular bottle, then the answer is simple: I should get my juice.
The reality, though, is that we can't look at individuals; we need to look at aggregate sets of consumers.
Fortunately, most retailers have frequent shopper programs, which yield useful data. Proper analysis of this data can tell us which SKUs are being bought by the most important customers, as well as inform us how loyal these customers are to specific SKUs. This is how we begin to decide which SKUs we really need to carry.
Note that pure volume isn't the critical factor. The identity of the buyer and the loyalty that buyer has to the SKU are what determine the value of the SKU.
We need to accept that consumers just want the specific things that they want. Then we need to use the resources at hand to determine which specific things our best, most important customers want, and we must deliver those things to them.
We also must stop listening to CPG manufacturers who talk about the importance of choice as a way to justify endless SKU proliferation. We must demand that these CPGs prove that their new SKUs meet real consumer needs -- that they're destined to be the products our best customers want.
And we must apply this discipline as well to our private label offerings, our fresh and peripheral department offerings, and all other aspects of the store. We must evolve our stores from emporia of confusion, offering endless, meaningless choice, into stores that know their best customers and the things they want most.