Monday, March 08, 2010

Bringing SKUs Back at Wal-Mart

On February 16th,in a post titled "Retailers Get Tough on Brands," I wrote about how many retailers have been rationalizing their product assortments. I outlined a number of reasons for this product line rationalization including the profitability of private label, the improvement in inventory turns, and the reduction in logistics costs. Now, we read in a Business Week article that Wal-Mart may be reconsidering some of the streamlining that they have done in product assortments.

According to the article, "Wal-Mart Stores Inc., the world’s biggest retailer, is bringing back some products it had removed from shelves last year as shoppers turn to competitors for a wider selection of merchandise." This move by Wal-Mart raises some interesting questions about customer expectations. People had clearly come to expect wide product assortments from Wal-Mart, and thus, the rationalization appears to have created some backlash. For retailers such as Trader Joe's, who have always had a limited assortment, customers don't have an expectation of finding a wide variety of brands, pack sizes, and the like. The expectations at mass merchandisers is clearly different. The expectation issue appears to be a key hurdle for companies as they trim product assortments. For large mass merchandisers, the key will be to trim SKUs that can't easily be found at competitors, that don't have a loyal core of fans, or whose removal won't cause a reduction in store visits on the part of loyal customers.

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