So far, most consumers have not observed assortment changes, with only 7% reporting a noticeable reduction in product variety. And although 42% of retailers decreased assortment in 2009 amid considerable industry hype, assortments overall shrunk by only 1%. Looking ahead to the second half of 2010 and 2011, however, retailers' strategies call [image-nocss] for continued downsizing, then maintaining reduced assortments moving forward, Nielsen said.
And 40% of retailers indicate they will continue to downsize, with stated targets to cut up to 10% of SKUs on the shelf.
"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, vice president of custom analytics for Nielsen. "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."
How costly? Some 7% of personal care product shoppers say that when faced with a shelf that does not contain the item they want, they will leave the store without buying the category at all. Often, this translates into the consumer taking their entire shopping basket purchase elsewhere. While 7% may seem like a small number, consider that just a one half of 1% decrease in shopper closure across the grocery channel could cost as much as $1.5 billion in sales.
Driven in part by the recession, consumer packaged goods (CPG) retailers are making assortment changes for several reasons. According to Nielsen, 75% of retailers are downsizing their product assortment to improve merchandising opportunities, while 71% cite a desire for greater control over inventory; 60% state the moves are made to alleviate shopper confusion, while 52% are reducing selection to cut costs and improve profitability. Nearly half (48%) of retailers are making more room for store-brand products.
According to Nielsen, the key for retailers lies in reducing assortment strategically, while balancing the interests of the retailer, manufacturer and consumers. Nielsen recommends adopting an ongoing, objective process around assortment and applying intelligent analytics to help retailers identify the products that provide the greatest incremental sales benefit.
"Success in today's competitive retail market is no longer about having the most productsit'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."
New York City-based Nielsen surveyed nearly 50 retailers across U.S. CPG channels and consumers in more than 21,000 U.S. households conducting nearly 55,000 shopping trips. The surveys were conducted online in March and April 2010. The company also conducted an industry assortment benchmark analysis, spanning more than 30 grocery categories.
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