To appropriately understand the scenario the discussion could involve a few practical examples of some renowned organizations. Brands who have been growing day by day actually knows all about its consumers mean to say their taste, buying capacity, and also even frequency of use of a particular items. Mostly stores like Wal-Mart focus on this issue to better serve its customers and helping them in optimizing their shopping benefits. This also can be recognized as a value added service. No store can give customer more variety until they reduce a certain SKU-Stock Keeping Unit of a particular product. And it is not an easy decision too. Moreover, this reduction not only caters the national brands but store brand itself survive in the same manner.
Wal-Mart is also redefining the roles of individual categories in its stores and rethinking the depth and breadth of product assortment choices. As part of this role re-definition, Wal-Mart is reconsidering the role of national brands for some of its categories. For example, if the category is not considered a significant profit-builder and is somewhat additional to the needs of Wal-Mart’s customer base, that category becomes a prime candidate for reduced shelf space and significant SKU reductions.
In some categories, retailers are figuring out that national brands are not always the drivers of the category and are looking to reduce the number of national brands on the shelf significantly, while expanding the presence of their own more profitable store brands. Always remember that the premise of reducing shopper confusion and eliminating non-productive SKUs makes an incredible amount of sense, but carries considerable risk if not managed correctly. For retailers the discontinuing items with high shopper-loyalty risks driving the shopper to a competitor’s store.
When shoppers arrive at the shelf, it is essential to understand how they organize their needs and make purchase decisions. Understanding these behavioral dynamics will provide valuable insights that define both shelving and assortment principles. Once the way the shopper uses the product and makes purchase decisions has been defined, then organizing principles for SKU, line or brand rationalization can be established. Which approach has the optimal impact on the category and the shopper must be determined. Simply eliminating the bottom 20 percent of SKUs based on velocity may not necessarily reduce confusion at the shelf. In fact, it could potentially result in low velocity/ high-loyalty SKUs being discontinued, which could cause shoppers to choose an alternate store.
The end game is to reduce shopper confusion and improve category metrics result will be and satisfy shopper choices at the category segment level. This is not a one-time event but an ongoing, evolutionary process that requires a shopper lens on the category and the appropriate tools to effective and incremental category growth.
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