During the recent unpleasantness, AKA the Great Recession, lots of retailers cut costs by cutting SKUs. At some chains, the cost accountants had a field day dumping items with insufficient inventory turns to generate as much annual “rent” for their square inches on the shelf as some minimum standard handed down from HQ. Now, as things are improving a trifle and consumers are start some cautious spending again, the SKU-slashing has started to bite retailers who cut too deeply. Rip Van Consumer is saying “What happened to my favorite _____ that I used to buy here?” and flouncing off in a huff when s/he hears “Oh, we don’t sell enough of that to stock it anymore.”
I ran into that mentality at our local supermarket some months ago. I drink a lot of grapefruit juice because I take a lot of pills and find them unpalatable with water but orange juice is too sweet for me. I noticed it was getting harder and harder to find frozen GJ among the OJ and lots of other kinds of J housed in the block-long freezer case and asked a clerk about it. “Yeah, the parent company won’t deliver anything to us anymore that doesn’t sell a certain minimum,” she said. “After those last two cans sell there won’t be any more. We do have bottled grapefruit juice, though.” “But bottled juice is more expensive and takes up so much room I can’t stock up – I’d have to be buying a bottle every couple of days,” I objected. “Sorry,” she said. And I think she was, but that didn’t make any difference to the cost accountants.
So what does the Baum family do now? Every couple weeks we make a shopping trip to a store a little farther away that prides itself on assortment. They still carry frozen GJ and we buy a ton of it. Along with whatever else we happen to need at the time…some of which our local store also carries but isn’t going to be selling as much of to us anymore because we won’t be coming in as often.
I’m not the only curmudgeon who says, “Fine, I’ll take my business elsewhere.” Mass Market Retailer reports a new Nielsen study cautioning about the negative impact of cutting items. MMR says “Walgreens has backtracked on SKU-reduction moves that eliminated nearly 50% of SKUs that it classified as impulse or convenience items…It has returned several hundred eliminated products to the shelves of stores…” Wal-Mart and SuperValu are starting to discover the same thing. An executive VP at the Bentonville Behemoth observed: “…eliminating a slow-moving $1 item can lose an entire shopping basket worth $60 to $80.” So they’re putting about 300 culled SKUs back on the shelves.
What’s the moral here? Stock everything regardless of sales volume? Of course not. The moral is that customers are not cattle. They don’t have to buy from your store or your website – in most businesses they have lots of alternatives. So anything you can reasonably do to make life easy for them when they shop with you, you should do. Even if they insist on returning things sometimes, or want to talk to you on the phone instead of emailing through your automated comment feature that reduces your support costs, or buying things you don’t sell as much of as you’d like.
When I was running a dot-com I winced every time some industry guru talked about “driving customers to the web.” Usually they meant stop providing a phone number on the site, or make it harder to call in orders from the catalog, or something that reduced retailer expenses at the cost of customer inconvenience. “You don’t drive customers,” I would snarl. “You coax them. You woo them. You coddle them. Because if you don’t, they drive themselves – away from you.”
It used to be a joke in business: “If it weren’t for those pesky customers we could get a lot more done around here.” Smart merchants remember that it is a joke – not a rule of business. Bless the customer and keep him or her…any way you can.
Mike Baum – Sophia Consulting LLC