We have all been there. You have had an amazing season, sales have been strong, there seems to be more growth coming your way and there is so much product out there that adding a few extra options wouldn’t hurt….or would it?
I’ve yet to work for a company where I haven’t had this conversation, whether that was with someone I was working with or with someone who I oversaw and managed.
Making money is of course a positive thing, however when it comes to adding SKUs/options, it’s at what cost to other parts of the business you don’t necessarily see, which make the issue slightly difficult.
Too much choice
Firstly, I know we don’t want to say it, but there is something about giving too much choice to your customer. When they come to into your store to purchase something, there is generally a real need that they have already created in their mind
Yes of course we have customers who end up buying more than they originally came in for (I would definitely say that I am one of those people!) and you want to give them the opportunity to do that. However when you start giving them more and more of the same thing, all you are doing is splitting your sales and not necessarily driving the extra growth you were hoping for.
Then there is that good old saying that I heard in my last role time and time again…’stores aren’t elastic’. There is a point at which they will burst, and they just wont have the room or they just wont be able to give the customer a credible looking offer.
I site two examples from my own experience:
I went into a store and I saw some children’s dungaree dresses which I didn’t buy at that time (and they were new to the offer). I went home, decided I did want them, and returned two weeks to the same store and couldn’t find them on display, so I went to the counter and asked. After waiting for someone to speak to someone else, then for them to ring through to the stock room, I had already been waiting for 10 minutes. I was then told that the product has been swapped that morning and was now sitting in an offsite stock room, and should I wish to purchase it, I would have to come back in 30 minutes to collect it.
Yes there were a lot of things around customer service which I wont mention here, but in the end I decided to walk away from that purchase. For me, it was knowing that it was sitting there in the stockroom with no display at all which just showed me the importance of dead stock and how to try and avoid stock (and cash) sitting and going nowhere…
The other was watching a peg end bursting with 40 different options of pencil cases, one design behind the other, and not one of them being able to showcase their true worth.
Cash is King
There are two parts to the cash investment piece.
The first of course is cash being tied up in one part of the business, not being spent in the parts where it needs to be. The other is the amount of work that goes into that one sku, if you think from conception to being delivered to a port to be being delivered to a store and a salesperson having to put it out.
All parts fit together, and its always important to just step back and think, is all the effort which is going to go into getting this into store, really worth all the additional costs it acquires along the way?
I do want to go back to the one thing I’ve already mentioned, as I think it’s worth mentioning again. We also see areas of decline, and its being able to really accept that it isn’t get better and that there are other places in the business which are growing much better and letting them have their day (and your space) so that they can drive the bottom-line. Remember it all goes into one pot at the end of the day….
The Debate and planning early
The relationship between the buyer and merchandiser, and the conversations, which lead to healthy debates, are always worth having. However, it’s always worth recognising that these really should be done at the planning stage so they can really be analysed.
Its also worth noting that businesses which do recognise the importance of this, ultimately realise how much profitability they can add without having to have non turning stock (as its sitting in the stockroom) or less markdown (as it didn’t work splitting the sales and one option ultimately won).
Most recently, Asda reported a 1.8% increase in sales (excluding petrol) and a 0.7% LFL performance (three months to July 2017) . They cited that strategy changes, which included targeted price reductions and reducing the number of options on shelves by 25% helped drive the increase.
I have worked in/overseen areas where options have grown, and have delivered. However it’s rare that it hasn’t impacted another part of the business, and therefore it’s important to have the debate and to be aware of the above.
Please email email@example.com for any consultancy based projects or any questions you have regarding the above article.