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.
Questions:
• 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?
Tags: analytics, assortment optimization, complexity, customer choice, customer experience, decisions, mental fatigue, Retail, shopping
I hope many will read this post.
1. Are there locations that you refuse to enter or shop because of clutter or too many choices?
Hmh, I can’t refuse since many times it’s the lady’s decision?
But if possible, I always select few choices store.
2. Are you willing to pay more for a clutter-free shopping environment?
Yes. I don’t look into prices as much as I look into feeling good.
What I’m missing though is actually trust. I would like to shop with trust into the company that is selling stuff to me. But lately I find myself too often in position to discover:
a) sales-personell doesn’t know what they’re selling
b) products are chosen just by their profit. So there’s no good food in stores anymore. That hurts.
So a+b = NO TRUST. Didn’t get to read that PDF, but assume trust is mentioned there.
Dusan, thank you for adding to the discussion! Your comment; “Products are chosen just by their profit. So there’s no good food in stores anymore” highlights the complexity of choice rationalization when it comes to actually removing options to make more room for customers, shopping carts and cleaner displays.
Keeping only the products that have the highest margin or best sell-through may not be the best choice, especially when there are other considerations such as preferences of high value customers. And how would you know those preferences, much less who your high value customers truly are without analytics? With myriad and complex variables, my take is that this time of decision making is prime for analytics and really shouldn’t be made without it!
Indeed there is plenty of mathematics, psychology and marketing behind much of what we see in the retail space!
Good article and right on. I experience the “overwhelm” the most while grocery shopping. Trying to find something simple, such as spaghetti sauce, is confusing and time consuming. I find myself standing back from the display and moving my eyes up and down the shelves until I can locate what I’m looking for.
To answer your other question, I do tend to stay away from stores like Wal-Mart and Target as the huge footprint of these stores completely overwhelm me. I know where certain stuff is and when I need to make a run for household staples (i.e. paper towels, laundry detergent), I go in, go straight the aisle I need, and get out.
Dianna, appreciate your comments and additions to this column. Retailers are hard at work to reduce the sense of “overwhelm” that some shoppers feel in their stores. The before and after pictures, in many respects, are quite amazing as clutter is transformed into clarity via shelf redesign (based on the product stocked), cleaner displays and of course (to your point) less product. It doesn’t make sense at first that a retailer could sell more by stocking less, but improvements in customer experience scores–and sales–suggest otherwise.
Hi Paul,
This is a topic that you and Ted Mininni have blogged about in recent weeks. You’ve both made excellent points about this issue. In recent marketing surveys, consumers polled have expressed a deep desire for simplicity. They’ve stated they want fewer choices. As Dianna points out: over assortments only frustrate and confuse people. And who wants to shop in a store that’s so crowded, you haven’t even the room to turn around without bumping into more racks and shelving, stuffed with merchandise? We all want to simplify our lives and streamline our wants and needs these days, hence our shopping. In manufacturers’ need to expand their business with new items as sales max out on existing products, more and more options continue to flood the marketplace. Likewise, retailers have long had the attitude that the more they offer consumers, the more they’ll be able to have “something for everybody” and grow their businesses. There’s also a fear of not having products that may induce customers to shop elsewhere. All of this thinking is slowly giving away to the new realities of the marketplace. . .we hope. It’s long overdue, and with consumer purchasing patterns changing dramatically now, let’s hope this provides even more impetus to tailor assortments at every level. It’s better to offer fewer, higher volume choices that are always in stock to maximize sales. Fewer, meaningful new products can still be added judicially and more sparingly if they represent innovations that make sense. The customer will welcome these changes.
Hi Claire, appreciate your thoughtful comments. You bring to mind Ted’s column on “Don’t Confuse the Customer – Limit Choices, Make More Sales” where he cites one retailer that actually ended up adding back culled product because customers were shopping elsewhere. This really brings the whole “science” aspect into play as testing and experimentation will help offer tweaks into getting the optimum assortment for a category based on multiple factors. Having this level of detailed analysis in hand will always beat industry heuristics!
• Are there locations that you refuse to enter or shop because of clutter or too many choices?
I have had the feeling of being overwhelmed by a section of a store. Shopping is already just a “to do” item to get done efficiently so if you throw in a bunch of static (products I will never buy) to sort through then you have a case of sudden onset shopping paralysis. Symptoms include indecision and excessive shelf scanning.
• Are you willing to pay more for a clutter-free shopping environment?
If it is something I care a lot about (e.g., outdoor gear and food), I will pay more for less clutter. I have to trust that the store is reducing clutter by choosing fewer, higher quality items. If the clutter reduction strategy is to give me a choice between a few bad or dubious products, then I am out of there fast.
Neil, appreciate your comments. You said, “I have to trust that the store is reducing clutter by choosing fewer, higher quality items.” Indeed, when it comes to assortment optimization there are so many variables to consider that what seems like an easy decision is actually very complex. This is an ideal case for sophicated analytics to find the best optimized choice. Now the key question is, how many retailers are flying blind without this type of advanced technology and how much better could they be doing if they had an analytics foundation?
Yes & Yes. Finding non-cluttered shopping experiences is getting more difficult. So much so that for clothing, there’s a return to bespoke suits and business attire.
Anu, good point on return to bespoke suits. Definitely something to be said for the experience and expertise that goes into made to order processes. Of course higher customization usually means higher costs, but there’s always a market for these types of approaches. Thanks for commenting and adding to the discussion!
• Are there locations that you refuse to enter or shop because of clutter or too many choices?
Not consciously. But I own that we’re complicated beings. Clutter can often be the cause of poor findability, and if I have a feeling I won’t be able to find what I’m looking for (either because I know that they have it but I’ll have difficulty finding it or because I incorrectly believe because of the clutter that they don’t have it), I will certainly avoid that store.
I do like that companies are testing different configurations and having enough faith in their results to put it into practice. Which would be more effective isn’t something that you’d necessarily get an answer to just by asking people. You have to test.
• Are you willing to pay more for a clutter-free shopping environment?
In some cases, yes, but unless forced, it isn’t something I consciously attribute to “clutter.” Poor organization leads to a sense of chaos. Chaos makes things appear cluttered. I have avoided certain discount grocery stores in favor of more expensive, better organized ones because I believed it would take less time for me to find what I’m looking for.
Again, some of that is attributable to selection (which flies in the face of “fewer choices”), but some of it is organization (which gives order to the available choices). Either way, the result is less clutter.
Good article.
Thanks Cam for your comments. You said, “I do like that companies are testing different configurations and having enough faith in their results to put it into practice. Which would be more effective isn’t something that you’d necessarily get an answer to just by asking people. You have to test.”
Indeed, testing is probably the most encouraging part of my review of this subject matter. More than simply ideas or intution, retailers are testing one approach vs another via control groups. So in combination with analytics, experimentation is driving winning results in sales, gross profits, revelance to customers and improvements in overall customer experience scores.
As always, I appreciate your additions to the discussion!
Paul,
Great article and excellent discussion in the comments. This is a subject near and dear to my heart. Excessive choice at retail is a sign that retailers aren’t embracing their role as curators of their space. Too often, the choices available represent a sea of confusing sameness that drives consumers away so they don’t have to go through the angst and work involved in understanding the choices.
Testing, using analytics and ensuring relevance to customers are signs that retailers are becoming smarter about simplifying! Definitely good news worth celebrating.
Best,
CB
CB, your comment, “excessive choice at retail is a sign that retailers aren’t embracing their role as curators of their space” was terrific. Liked the word choice of “curator” in regards to the roles and responsibilities of retailers. Thank you for adding to the discussion!
You’re absolutely right. I think the excessive choice and blurring of boundaries between types of retailers now that they all carry more of each others products is what’s behind the focus on store design and the heavy investment in private label brands. Now grocers (for one example) have to act like CPG companies by branding commodity product in order to have something different on the shelves that people want since they can get the name brands almost anywhere.
I remember when I first came across the choice research and we reset some grocery store shelves to see if it worked. It did, but the problem with sku optimization was subtle than finding the optimal mix by looking at product sales and profit. That’s sort of like managing by averages. If you don’t analyze the products by the customer segments buying them and look for sales and profit impacts, the reduction can create a lift in one class of product while damaging others. I’ve been impressed by some of the retailers who are factoring this in and setting assortment strategy based on which set of customers the product mix most impacts. Tesco is one that I can think of. Believe Best Buy was doing something similar too.
Mark, you are exactly correct in defining the complexity of assortment optimization. Were it so easy to just go by sales and profit margins! In fact, with myriad considerations this type of challenge is best suited for analytics. However, I’d also add that analytics in this instance would best be complimented with experienced judgment and expertise, especially when it comes to shelf design and merchandising techniques. I appreciate your additions to the conversation and thanks for dropping by MarketingProfs!