Some Categories May Be Vulnerable At Retail

soda can/bottled water


Retailers pushing to reduce costs and maximize margins in the face of sales declines are dead serious about optimizing assortments -- and in a growing number of cases, that's translating to significantly reducing SKUs or even cutting whole product lines, according to the Willard Bishop retail consultancy.

Reducing assortments has become an "increasingly viable option" for retailers, and CPG companies are reporting serious concerns about potentially "losing a brand" to SKU rationalization, reports VP Paul Weitzel in Bishop's latest Competitive Edge update, based on results of Bishop's 2009 Total Store SuperStudy. "We're not talking about a few SKUs," he warns. CPG companies are facing the unprecedented possibility that "they may lose an entire [brand] line."

Wal-Mart's "Win/Play/Show" category strategy, designed to focus the chain on categories where it can achieve high growth, will reduce assortment levels by 15% to 18% -- and this trend is far from limited to Wal-Mart, according to Weitzel.



Smaller-format stores and greater focus on increasing sales on the store perimeter at the expense of center-store space are among the factors putting the squeeze on available shelf space and creating an increasingly Darwinian environment for suppliers. Fewer SKUs also mean fewer out-of-stocks and lower labor costs.

To assess their category and brand vulnerabilities, suppliers need to have a firm grasp on five key metrics, according to Bishop: variety (What does the retailer need to meet consumer demand?); profitability (How much money does the retailer make on this item/line/category?); productivity (How productive is this shelf space?); working capital (What is the inventory costing, and what is the ROI?) and growth (Is the category growing or declining?).

Weitzel reports that based on Bishop's "Variety Scoring System," top food categories that could be vulnerable to SKU rationalization include bottled water; carbonated beverages, cookies, ethnic/ specialty, frozen poultry/meat, Mexican, new age beverages, salad dressings and vinegar.

Non-food categories that could be vulnerable include adult nutrition, baby HBC, bath, cosmetics, diet aids, grill accessories, lawn and garden, pet supplies, skin care and soap.

Next story loading loading..