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Over half of U.S. consumers are likely to shop elsewhere if they come across a reduced product selection, while almost half of retailers are continuing to cut assortment, according to research revealed at Nielsen’s Consumer 360 Conference in Las Vegas.
So far, only 7 percent of consumers said they’ve actually noticed a reduction in product variety. Also, despite the fact that 42 percent of retailers decreased assortment in 2009 amid considerable industry hype, assortments overall shrank by just 1 percent. For the second half of 2010 and into 2011, however, 40 percent retailers said they would keep downsizing by up to 10 percent of SKUs, and then maintain reduced assortments moving forward.
“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,” noted Stuart Taylor, vice VP, custom analytics at The Nielsen Company in Schaumburg, Ill. “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.”
Just how costly can be seen by the finding that 7 percent of personal care product shoppers said that they’ll leave a store empty-handed if it doesn’t the item they want. This usually means they’ll find what they want at another retailer. While 7 percent doesn’t seem like a lot of people, retailers need to consider that just a one-half of 1 percent drop in shopper closure across the grocery channel could cost as much as $1.5 billion in sales.
Spurred partly by the recession, CPG retailers are making assortment changes for a variety of ends. Nielsen found that 75 percent are cutting their product assortment to enhance merchandising opportunities, while 71 percent want greater control over inventory. Sixty percent wish to assuage shopper confusion, and 52 percent aim to reduce costs and boost profitability. Almost half (48 percent) are making more space for private label items.
What retailers should do, according to Nielsen, is reduce assortment strategically, while balancing their own interests against those of manufacturers and consumers. To that end, the company suggests that retailers implement an ongoing, objective assortment process and apply intelligent analytics to help identify products with the greatest incremental sales benefit.
“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.”
In March and April 2010, Nielsen surveyed online almost 50 retailers across U.S. CPG channels and consumers in over 21,000 U.S. households conducting nearly 55,000 shopping trips. The company additionally conducted an industry assortment benchmark analysis encompassing more than 30 grocery categories.