What to do when a retailer says they’re reducing SKUs
It’s a message that seems to pop nearly every year from a retailer. You get the note that the buying team is looking to reduce SKU count. This message manages to build initial panic in CPG companies as these retailer announcements come during times of good business and bad business. It’s a strategy that can be both reactive and proactive, but the first thing that comes to mind is that you may lose shelf space and ultimately sales. While brands can’t determine a retailer’s strategy, what they can do is chose how to react. Here are a few things your brand can do when a retailer says they’re out to give the ax:
Assess your brands/SKUs likely vulnerability relative to the rest of the category.
This starts with sales productivity, but it’s not only about the top line sales number. The biggest mistake a brand can do is make a case based only on sales volume (especially not knowing competitor sales) and not taking the time to evaluate other layers of the business. Consider the these additional insights:
Lost Sales Analysis– How much of the lost sales will be absorbed into an existing SKU? It may not be all doom and gloom if you believe your guest will still shop within your brand. However, if your analysis shows lost sales will go to another retailer, you may be able to make a compelling case for your SKU to stay.
Is there a guest relevant reason for an item to stay? An additional color or flavor may not be a good reason, but a certain price tier might be.
Consider a segmented or channel strategy. For example, your item could be online only or in top urban stores. This is where data analytics is extremely important in determining where your product is best with unique guests. Our Target Neighborhood propriety tool takes segmentation deeper to pinpoint the best neighborhoods for your brand and maximize sales opportunities within the category and Target.
In 2019, it’s clear the brick and mortar stores that are thriving, are stores that give a compelling reason for guests to come in and shop by creating an in-store experience that delights. The 21stcentury retail experience means changes to traditional layouts by making shopping easier and more enjoyable with decreased space dedicated to product and increased space dedicated to the “wow” factor of shopping in a store. Every category will be affected differently so it’s important that your brand uses deep analytics and insights to support your selling story. Frontier Analytics from Jacobs is able to use hundreds of data points to isolate specific demographics that influence your brand. Jacobs' team of data scientists and analysts use data as a key input to drive decision making, improve understanding of your core guest, and maximize sales opportunities for your brand. By identifying true guest behavior and formulating a clear understanding of brand perception and brand opportunities at Target, the message of SKU reduction may actually be an advantage for your brand.