Chuck Nascimento shops for peanut butter at the Heartland Wal-Mart in Mississauga.JENNIFER ROBERTS
Several months ago Wal-Mart Canada Corp. decided to overhaul one of the staples of its grocery business - the peanut butter aisle.
It dropped two of its five lines of peanut butter to free up scarce shelf space for cinnamon spreads. But the decision didn't cost the retailer a single jar in sales. With fewer selections to browse, customers wound up purchasing more than before.
"Folks can get overwhelmed with too much variety," said Duncan Mac Naughton, chief merchandising officer at Wal-Mart in Mississauga. "With too many choices, they actually don't buy."
In a reversal, retailers are now reducing the amount of choice on their shelves. After years of tempting customers with ever expanding arrays of brands, hues, sizes and flavours, they're racing to simplify their offerings. The recession has encouraged them to focus on top sellers and private labels while throwing marginal products overboard.
Storekeepers are culling their product lines to trim costs, reduce consumer confusion and ultimately boost sales. Reducing the number of products can help companies increase sales by as much as 40 per cent while cutting costs by between 10 and 35 per cent, according to a 2007 study by consultant Bain & Co.
But the process of choosing which products will die can be hit and miss - and retailers risk a customer revolt if they get it wrong. "Even with retailers removing products on the shelf, public pressure can bring them back," said Liesbeth Teerink, managing director of marketing agency Launch.
Customer feedback was quick when Loblaw Cos. Ltd. recently culled about 10 per cent of weak-performing products from a store in west Toronto. The retailer is now restocking about half those items because customers missed them.
"We knew we'd get probably about half of it wrong," Loblaw executive chairman Galen Weston told shareholders earlier this monthDunnhumby, a British-based loyalty-program expert, late last year to help minimize the risks of pruning products.
Its tests found that each category has to be evaluated separately. Reducing the array of slow-growth dairy products such as margarines didn't hurt their sales, while adding more yogurts to the cooler boosted business in the category, Eric La Fleche, Metro's chief executive officer, said recently.
Added Mr. Mac Naughton at Wal-Mart: "We're balancing choice, duplications and cost."