- Strengthen the categories "Win" and "Play" (major categories and those with high potential), by increasing the range and improving the visual display of the shelves.
- Maintain the category "Show" (low importance and reduced potential) - and whenever possible, rationalize the assortment... in other words, reduce it.
The debate on "SKU Rationalization" was launched. Walmart was pleased with the results: "Our 'win, play, show' merchandising strategy has resulted in greater clarity of our offerings across the entire store and therefore cleaner assortments. We will continue to accrue benefits from 'win, play, show', strategy this year". (Eduardo Castro-Wright, Vice Chairman, Wal-Mart Stores, Inc.)... and announced reductions in the number of references of as much as 18% in some categories. This is reflected by both a net reduction in varieties, and for the first time, by the disappearance of entire ranges of products. U.S. retailers have put forward the fact that increasing the ranges and new product lines did not create any value - and therefore unlisted them in order to increase the productivity of their shelves. After Walmart, most of the other distributors did the same: Kroger created a similar programme with dunnhumby, Walgreen launched its "Customer Centric Retail Program".
This movement was accompanied ... by the development of their own private brands: Walmart thus unlisted the Glad and Hefty packaging products and replaced them with the Great Value references. The reasoning is simple: "I un-list brands that are non-leaders - keeping the two or three most important brands for the most part... and I replace them with a private label".
The results were diverse - and largely depended on the category:
- Wal-Mart just announced they were reintroducing 300 to 400 grocery references: "There were some examples when we thought we could take a product out of the assortment and the consumer would substitute something [else], and We made a mistake...".
- Giant Food Stores (a subsidiary of Ahold) have made public some of the results of the experiment they conducted on 20 categories since 2009: in frozen vegetables (where they reduced the selection by 13% - from 217 to 188) sales stagnated in value but the margin, sales volume, and number of customers increased / cooked chicken (which was reduced from 69 to 63 references) saw increases in value, volume, margin and number of customers / on the contrary, the fruit juice category yielded poor results.
- A recent study by Nielsen ("Too Much Choice and Variety: Assortment Realities") shows that in 2009 the market share of private labels increased at the expense of entry-level national brands and new products; "premium" national brands remained stable.
I am convinced that the process of rationalization of product ranges is just beginning and will spill over U.S. boundaries:
- Retailers will learn how to manage their references better and will gradually reduce the number – by fine-tuning their market tests.
- They will use the opportunity to durably install their private labels.
- The secondary national brands, variants like the "me too" ranges without real added value will be the first victims of this rationalization.
- The leading national brands have already reacted on seeing the opportunity that this movement offers them - and their flagship products: "We're pushing it because it will make room for our power items that are out-of-stock all the time and have to be continuously replenished, and we're trimming our own portfolios and seeing productivity enhancements". (Survey conducted by Bishop Willard among vice presidents of sales in 25 companies).