• by Sarah Mahoney  @mahoney_sarah, June 16, 2010

Now that retailers have spent much of the recession steadily pruning back the options they offer shoppers, a new study from the Nielsen Co. says they may be in for a rude surprise: More than half of U.S. shoppers say they'll switch stores if they notice a reduced product selection in consumer packaged goods. (As a case in point, Walmart has reportedly recently added back between 300 and 400 items to its grocery shelves alone, based on customer reaction.) 

Considering that 42% of stores have already cut assortment, and 40% plan to continue to do so this year and next, eliminating as many as 10% of their SKUs, that may well make for some pretty antsy shoppers. Marketing Daily asked Stuart Taylor, VP/customer analytics for Nielsen, who is presenting the data this week at its Consumer 360 Conference, to explain.

Q: Why are stores cutting back on the number of items they stock?

A: It's a response to a real problem -- after years of proliferation, consumers are having a hard time finding what they want. More than half of the chains we surveyed say they are doing so to cut costs and improve profitability, but it's not that simple. They also want more control over their inventory, to make room for more store brands -- and 60% say they are doing it to reduce shopper confusion.

Q: Are they doing it well?

A: No, so far we are seeing only average behavior, leading to average results. Unfortunately, we're finding that as variety goes down, sales go down, too. And there is a better way. Instead of thinking of this just as a cost puzzle, we need to bring the consumer into the picture. Done right, reducing assortment can result in an improved customer experience and greater profitability. The problem is, you [may] eliminate the wrong products.

Q: What about simplicity -- the idea that consumers want fewer choices sometimes?

A: It's true that we all want our lives simplified -- but we also want our needs met. My definition of good variety means the ability to find my product.

Q: Are shoppers voting with their feet?

A: Not yet. The good news is that so far, only 7% say they've noticed a change in assortment. And 34% say they are still seeing increases, which we attribute to years of brand proliferation.

But as they notice reductions, they will change their behavior -- 7% of personal-care product shoppers say that when what they want isn't there, they'll leave the store without buying anything in that category at all -- that can translate into taking their whole basket elsewhere.

And I know that 7% sounds small, but not when you consider that just one half of one percent decrease in shopper closure across the grocery channel could cost as much as $1.5 billion in sales, it's significant.