Depth of assortment matters

There are all sorts of efficiency-oriented reasons why it makes sense to reduce product assortments. Store operations are simplified, in stock improves, inventories decline, etc. The only problem is customers don’t like it and will shop elsewhere if retailers get too ambitious in their efforts to streamline. That’s according to The Nielsen Company which conducted a survey 50 retailers and 21,000 U.S. households and found that a majority were likely to shop elsewhere if product assortments were reduced. Roughly 7% of those surveyed said they had noticed a reduction, even though 42% of retailers indicated they had reduced assortments. Seven percent is a big deal in a retail marketplace where every share point matters and customers unable to find a single item could theoretically transition all of their dollars to another retailer if said item is a key traffic generator. Retailers will have to work hard to avoid the pitfalls of SKU rationalization during the second half of 2010 and 2011, as Nielsen’s survey indicates retailers’ strategies call for continued downsizing and reduced assortment offerings going 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,” said Stuart Taylor, VP custom analytics with Nielsen. “In many case, 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.”

The survey included 50 retailers and roughly 21,000 U.S. households and results were presented at the company’s Consumer 360 conference that took place this week in Las Vegas.