SKU Rationalization Leads to More Sales

According to Insights from the 2021 Dunnhumby Retailer Preference Index, shoppers correlate speed of transaction (i.e. the time from entering to exiting a retailer) with safety. So, retailers with efficient floor plans and speedy checkouts saw an increase in consumer satisfaction in 2020 due to fear caused by COVID-19. 

It’s clear that consumers are looking for quick experiences at retailers, and grocers are not exempt from this. When you help speed up your customers’ visits to your stores, you instill a sense of safety, which can then lead to repeat visits. One way to reduce the time from entrance to exit, is to implement a SKU rationalization strategy. 

A SKU rationalization strategy helps retail executives efficiently and effectively determine which items to sell, along with whether to increase, reduce, or eliminate certain products. It’s not as simple as having a ton of options and letting customers choose. Research suggests there is a sweet spot when it comes to choices, and presenting too many options can discourage people from making a purchase. 

In 2000, psychologists Sheena Iyengar and Mark Lepper conducted a study at an upscale food market. One day, they displayed a spread of 24 gourmet jams. Those who sampled one of the jams received a coupon for $1 off their purchase. Another day, they displayed only six gourmet jams. Although the larger display appeared to gather a big crowd and more interest, those who sampled from it were one-tenth as likely to buy the jam as those who sampled from the smaller display.  

Studies have also found that as the variety of snack options within a convenience store increases, the sales volume and customer satisfaction decreases. Why does this happen? Doesn’t logic dictate that having more choices is a good thing? Yes, having more options is good, but when given too many, it can affect consumer emotions and decrease sales. This blog post examines three reasons why less is more and how putting this concept into practice increases sales. 

1. Increased Satisfaction 

The studies mentioned above (and many similar studies) demonstrate a phenomenon known as “choice paralysis.” When consumers face too many choices, they must weigh all these choices against each other to make the best decision. The more choices available, the more likely a consumer is to feel overwhelmed or experience buyer’s remorse from wondering if they made the right decision. Presenting fewer options eliminates this paralysis and indecisiveness, helps consumers choose with ease, and reduces the likelihood of buyer’s remorse. 

2. Decreased Anxiety 

Although we don’t often think about anxiety in relation to grocery shopping or making minor food-related decisions, evidence suggests that too many options can create stress for the consumer. Spending a significant amount of time considering which item to buy creates anxiety around product expectation and can contribute to self-blame if the item doesn’t measure up. For example, choosing from among 100 ice cream flavors is overwhelming, and if you don’t love the flavor you choose, you’ll know there was definitely a better option. If there are only six flavors, consumers tend to find it easier to choose and they will experience less remorse if they didn’t like their pick. With fewer options, the stressors are relatively negligible to the consumer. 

3. More Consumer Trust

When you offer a well-balanced, stress-free number of options, your brand will begin to build trust with your consumers. Many retailers have determined their ideal number of options is around three. They also train associates to offer two items when a consumer has questions. One item will be a little bit different than what the consumer requested, and the other item will be exactly what the consumer wanted. This helps the consumer make the right choice, makes them feel heard, and makes them more likely to buy. If the associate offers three identical options, the consumer would feel confused, and the experience would create a barrier to buying. When a salesperson offers fewer options, the consumer sees that individual as an expert and develops more trust in the retailer’s brand.

SKU Rationalization For Successful Inventory 

Not all retailers are the same, and the demographics of shoppers vary. So how can you determine what exclusive selection of retail goods you should offer at your grocery store? Thanks to data science, there’s an equation known as SKU rationalization or assortment optimization that can help you determine exactly which items will do well in your store. This equation is an essential decision process for grocers who want to manage their inventory levels as successfully as possible while ensuring that shoppers always find the right product variety to meet their needs. 

To learn more about SKU rationalization and how your organization can benefit, we invite you to download the eBook below. In this eBook, Date Check Pro and Itasca Retail come together to help grocers understand how to make SKU rationalization a reality. This eBook covers: 

  • Why the right category assortment is important for stores and their customers.
  • How to avoid factors that lead to having too much inventory. 
  • The essential data needed to guide SKU rationalization decisions. 
  • The solutions that will enable retailers to get the job done right.
Download the ebook