Previous retailing philosophies included such gems as “stack it high and watch it fly” and “more choice is better.” However, some multi-national retailers have discovered that reducing store inventory can actually improve the customer experience and boost sales. Increasing sales by reducing customer choice may sound like a paradox, yet retail experiments validate that shoppers don’t want clutter and instead prefer clarity.
A previous column, “When Less is More in Customer Choice” cited that many marketers believe innovation and competitive differentiation arise from giving customers more choices and options. But through the strategy of offering more choice, marketers may actually end up increasing complexity, costs and causing customers “mental fatigue.” And avoiding mental fatigue is what retailers are after, especially when they learn that simplicity in store layout and merchandising can lead to sales increases!
Cleaner, simpler and less chaotic is the new mantra for retailers. This means removing towering aisles of product twelve feet high, reducing in-aisle displays, and fewer bins of “grab bag” mixed product. Inevitably though, these improvements in the shopping experience will most likely lead to fewer products stocked and potentially a drastic reduction (10-15%) in SKUs.
But how does a retailer choose which products to eliminate, especially when there are so many variables (year-over-year sales comparisons, seasonality, pricing, profitability and trade promotion dollars, etc.) to consider? More than just traditional rules of thumb or guesswork, analytics and experimentation help retailers get this mix right.
Babson College professor Thomas Davenport has identified eighteen analytical trends that are relatively well established among retailers, such as assortment optimization and shelf space allocation, pricing optimization and market basket analysis among others.
These analytical processes help optimize categories and merchandise quantities effectively allowing retailers to “give space back” to shoppers without sacrificing sales and gross profit. In addition, retailers are using analytics to help decide which categories could benefit from private label sales—or store brands—which tend to carry higher margins.
Retailers are also experimenting with control groups to project how remodels will impact sales. Through testing and experimentation, retailers can discern which changes most improve metrics such as customer experience scores, sales, gross margins and inventory reductions.
For some retail managers, the idea of removing product, reducing aisle height, and even giving space back to customers is contrary to “what works.” However, customers are voting with their feet—and subsequently their wallets.
A win-win outcome is possible where customers gain a more satisfying shopping experience via brighter stores, cleaner merchandising displays, more room to maneuver carts in aisles, and less maddening clutter. And retailers benefit with improvements in category and overall store sales, inventory carrying costs and customer satisfaction scores.
Customers are already facing too many choices on a daily basis. More choice isn’t always better and in fact, reducing customer choice may be the best option for your enterprise.
• Are there locations that you refuse to enter or shop because of clutter or too many choices?
• Are you willing to pay more for a clutter-free shopping environment?