LAS VEGAS – June 15, 2010 – – Consumer packaged goods (CPG) retailers take note: more than half of U.S. consumers tell The Nielsen Company they are likely to shop elsewhere if they notice a reduced product selection, while nearly half of retailers indicate continued plans to decrease assortment. New insights on the topic that’s become the buzz of the CPG industry were announced today at Nielsen’s Consumer 360 Conference, the global intersection of what consumers watch and what they buy.
So far, most consumers haven’t observed assortment changes with only seven percent reporting a noticeable reduction in product variety. And although 42 percent of retailers decreased assortment in 2009 amid considerable industry hype, assortments overall shrunk by only one percent. Looking ahead to the second half of 2010 and 2011 however, retailers’ strategies call for continued downsizing, then maintaining reduced assortments moving forward. Forty percent of retailers indicate they’ll continue to downsize, with stated targets to cut up to 10 percent 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, Custom Analytics, The Nielsen Company. “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? Seven percent of personal care product shoppers say that when faced with a shelf that does not contain the item they want they’ll leave the store without buying the category at all. Often, this translates into the consumer taking their entire shopping basket purchase elsewhere. While seven percent may seem like a small number, consider that just a one half of one percent decrease in shopper closure across the grocery channel could cost as much as $1.5 billion in sales.
Driven in part by the recession, CPG retailers are making assortment changes for several reasons. According to Nielsen, 75 percent of retailers are downsizing their product assortment to improve merchandising opportunities, while 71 percent cite a desire for greater control over inventory. Sixty percent state the moves are made to alleviate shopper confusion, while 52 percent are reducing selection to cut costs and improve profitability. Nearly half (48 percent) of retailers are making more room for store brand products.
So what’s a retailer to do? According to Nielsen the key 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 products – – it’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.”