Article

Opinion: Retailers need to cut their SKUs

Increasingly, less is more. Here are some tips on shaving your product assortment down to a more manageable, profitable size.

July 8, 2009

A recent article in the Wall Street Journal talked about how all the largest chains are reducing choices for consumers.

Pharmacy chain Walgreen Co. is cutting the types of superglues it carries to 11 from 25. Wal-Mart Stores Inc. has decided that 24 different tape measures is 20 too many. Kroger Co. has tested stripping out about 30 percent of its cereal varieties. In the next year or so, these and a few of the other largest retailers are expected to slice the assortment of products in their stores by at least 15 percent, industry executives and analysts say. "All that go-go 1990s where we were adding items in and adding items in, and people wanted more, more, more, more choice... just didn't pay off," said Catherine Lindner, Walgreen's divisional vice president for marketing development, at a recent conference. Looking at store shelves, "people say, 'Whoa, you're bombarding me. Help me figure out what I need.'"

If the big guys are doing it, you should be too. Here's how:

• Take a look at your inventory categories' sales figures by month and year-to-date.
• Within each category, look at your bottom 20 percent — the ones not moving
• Cancel all orders to replenish
• Come up with a sale to clear them out
• Use your money saved to add to your top two categories of merchandise

It's never easy to let go of items we personally thought would be good movers but when you have 20,000 SKUs, how much duplication do you need?

The big boys know: not much. Same with you.

Bob Phibbs, "the Retail Doctor," is an author and retail trainer. He blogs about retail atRetailDoc.com.