Monday, July 20, 2015

Category Management: Some Thoughts On The Positive Impact of The Growing Product Ranges In Retail

French magazine LSA has recently posted an article on the positive impact the growth of product ranges on sales figures. The article is quite comprehensive and includes detailed graphs and data.

Especially, this graph is key: the growth of the number of SKUs has grown by 72% in 18 years. Actually, the growth of product range actually overpass the growth of sales and volumes. Moreover, the article underlines 80% of the time a new SKU brings growth to the category.

Furthermore, customers love choice and plebiscite more products:

But to me, the article outlines one issue, and I would like to add 2 another key ones:
  • The growth of the product ranges lead to issues in merchandizing and product visibility. The more products, the more difficult it is to find the right one and to make its choice. Moreover, hasn't the retailer a mission of product selections? I believe a lot of value for money could be brought by the product selection in order to create a better customer experience.
  • The more product, the more costs: And I come back to the concept of Direct Profit by Products. This is the reason why companies like Costco, Ikea or Lidl are keeping short product selections in order to lower their costs of good sold and remain competitive in pricing. 
  • The number of SKUs grow faster than the commercial real estate: at some point it is not possible to seek for growth only by adding new products. Because at some points stores won't be able to get them.