Managing product assortment has always been a challenge. There are so many things for a retailer to consider. For example, category/segment sales, manufacturer support (the amount and frequency an item is promoted), item contribution (what the item contributes to the growth of the category), the importance of the item to their shoppers, item distribution at competitors and markets, etc.
Getting the right product mix can sometimes appear to be a daunting task. For this reason, I continually advocate a strong relationship with a trusted manufacturing partner and the diligent application of true category management principals, deep diving into the category well beyond the canned topline reports when necessary.
Another consideration is the category’s size within the retailer’s store. You may have noticed that some categories perform poorly with ample space to feature a broad selection while other categories excel with reduced space. This may seem counter intuitive, but it's the law of diminishing return suggesting that too much of a good thing is bad.
For instance, nut based nondairy shelf stable beverages are a growing segment, however contribution continues to decline. This would imply that there are too many items on the shelf competing for shoppers' sales dollars.
Simplicity & diversity
Consumers like things simple: stores that are easy to shop, well merchandised, friendly and inviting. Some retailers make the mistake of trying to provide too much variety in a category. This can sometimes backfire depending on your store’s unique niche.
Say the snack category has 20 feet of shelf space in your store, for instance, with three segments. Grain snacks have a $45 share of $100 and sales are increasing 25 percent. Grain snacks should have 45 percent of the available shelf space in this basic example.
Some retailers might look at the sales increase and try to add additional grain items to the section and/or make room for more grain SKUs to take advantage of the growth trend. There is a point where the increased distribution could confuse consumers and cause category sales to decrease. Grain's contribution to the snack category will decrease as a result. A savvy retailer would balance the grain sales growth and manage it against other segments to achieve sustainable category growth.
This is similar to an investment counselor telling a client to not put all their eggs in one basket and spread their money across different investments: diversification. The client has a fixed amount of money to invest just like the shopper has a fixed amount of money budgeted for snacks.
A retailer should work hard to create a strong product mix/assortment for each category. They should also apply the same efforts to the managing of the size of each category in the store to maximize sales. Would 28 feet of bottled water sell as well in only 4 feet? The incremental 24 feet of space could be used to generate sales and drive customer foot traffic.
This is where having solid strategic partnerships with strong manufacturers across different categories pays off. They are the category experts and should be able to help you find the right mix to compete with success.
How do you work with manufacturers to grow sustainable sales?