The SKU rat trap
NEW YORK —When it comes to the front-end offerings at drug and mass-market retailers, there is perhaps no topic currently being talked about more than SKU rationalization—and there’s a good reason why.
In light of the volatile economy and fragile retail environment, many retailers raced back to the drawing board to re-evaluate their businesses—moves that often resulted in deep discounts, a much stronger focus on private label and, of course, SKU rationalization.
Enter, for example, Walgreens’ massive Customer Centric Retailing initiative, dubbed the CCR project. The project is aimed at jazzing up the front end by rationalizing and rejuvenating the merchandise mix, section by section, to weed out slow-moving and redundant product. The initiative called for the delisting of some 4,000 SKUs.
Meanwhile, Walmart reduced up to 30% of its assortment last year, stated Euromonitor International in a June 30 webinar on the home and personal care industries.
While the newly reshaped, money-conscious consumer had long expressed a desire for cleaner, less-cluttered stores, the aggressive slashing of SKUs at retail would, in some cases, prove too aggressive. It seems as though several retailers have found themselves caught in the SKU rat trap.
To underscore this point, recent research by The Nielsen Co., indicated that more than half of U.S. consumers surveyed said they are likely to shop elsewhere if they notice a reduced product selection and can’t find the product they desire on shelf. More specifically, 7% of personal care product shoppers said they would leave the store without buying anything if they can’t find the product they want. While 7% may seem like a small number, consider that just a 0.5% decrease in shopper closure across the grocery channel could cost as much as $1.5 billion in sales, Nielsen stated.
The online surveys were conducted in March and April 2010. Nielsen surveyed consumers in more than 21,000 U.S. households conducting nearly 55,000 shopping trips, as well as nearly 50 retailers across U.S. consumer packaged goods channels.
While SKU reduction likely is here to stay for the time being—as 42% of retailers indicated they’ll continue to downsize, with stated targets to cut up to 10% of SKUs, according to Nielsen—there is no doubt that some retailers are scaling back the efforts amid consumer backlash.
“We added back several hundred products, primarily to complement product class in categories such as automotive and hardware, and we initiated the introduction of new SKUs in existing categories, such as new branded electronic sets,” Greg Wasson, president and CEO of Walgreens, told analysts during the company’s third-quarter conference call on June 22.
Wasson added that, “Although results are preliminary, our second wave of CCR store conversions is trending well against the rest of the chain, and in Dallas, we’re encouraged by the improvement in sales variance versus the rest of the chain as well. If you recall, Houston had a larger percentage of stores impacted by the reduction of SKUs in the complement product class that led to more pronounced sales impact in those select stores, which are now showing improvement with the re-introduction of key SKUs.”
As indicated by Nielsen, as well as other industry sources previously interviewed by Drug Store News, the message to retailers is this: Choose very carefully when it comes to deciding which products will hit the chopping block.
FDA advisory committee shoots down Vivus’ Qnexa
MOUNTAIN VIEW, Calif. The possibility of a new drug for treating obesity suffered a setback Thursday as a Food and Drug Administration advisory committee voted against recommending its approval.
The FDA Endocrinologic and Metabolic Drugs Advisory Committee voted 10 to 6 against recommending approval for Vivus’ drug Qnexa (phentermine and topiramate), citing safety concerns such as the possibility of psychiatric problems and birth defects.
“We appreciate the advisory committee’s recognition of obesity as a significant health crisis and the challenges associated with the treatment of this disease,” Vivus CEO Leland Wilson said. “We are disappointed with the advisory committee’s vote.”
The company said it would attempt to address the committee’s concerns. An advisory committee vote is a recommendation, and while the FDA will take it into account when deciding whether to approve a drug, it is not bound to follow it.
Post-it launches Shopping Genius widget
LONDON 3M has developed a bargain-shopping widget with the help of its Post-it brand.
Inspired by usage of the classic Post-it note as a shopping list, 3M has developed an evolution of the shopping list for the digital age called Post-it Shopping Genius. How it works: Post-it Shopping Genius sits on your computer desktop, keeping an eye on the price changes for you, locating the cheapest price, and letting you know when it changes. The customizable application enables you to choose from thousands of electricals, durables and other consumer goods, and track up to five at a time.
The application — which can be directly downloaded from http://bit.ly/Post-itGenius and is available on iGoogle, Mac OS X desktop and Windows 7 / Vista desktops — displays up-to-date prices on many thousands of products, which are searchable within the tool.
In related news, 3M announced that it is offering a monthly monetary prize of 1,000 GBP ($1,542) or the value of a user’s shopping list if less as an incentive to those who refer the Shopping Genius application to a friend.