One line take-out: Each of us has a very different opinion on what the store should stock. To win us all stores need a wide range.
The top selling 1000 items in a supermarket generate about half of its sales revenue. Which means that it’s vital that store managers make these items easy to see and buy – but that’s another story.
What I’d like to highlight today is that the other 30,000 or so items they stock sell very little volume. This is what is sometimes called “the long tail”.
Stores try hard to weed out items that don’t sell. So the typical store item does sell, but rarely. Stores are full of stock that barely moves while a tiny percentage of the items fly off the shelf.
This can lead marketing consultants to advise retailers to pare back their range to concentrate on the items that deliver most of their revenue and profits. Yet this range (and cost) cutting strategy often fails. Unfortunately, it’s been encouraged by recent research (some of it flawed) on consumer confusion – research that mistakenly suggested that smaller ranges will increase sales.
It’s true that stores look cluttered and complicated. The average household only buys a few hundred different items from a supermarket in a year. That is, they do a lot of repeat buying of some items over and over. So each buyer is looking for a few things out of the 30-50,000 on offer in the store. That makes shopping sound like a horribly complicated task.
So why on earth would consumers be attracted to stores that stock so many items – most of which they don’t buy? One notion is that consumers like the IDEA of choice, that they are attracted to variety but once they actually arrive in-store they fall back on their habitual nature and existing loyalties.
There may be a little truth in this explanation but the real reason is that consumers are very heterogeneous in the items they buy. Remember that all those items in the store do sell, each item has its buyers. So given that each of us is buying only a tiny proportion of the items in store the odds that my shopping basket will share anything in common with the person in front of me in the queue (or anyone else for that matter) is very low. As I often point out, if you look at what’s in the shopping trolleys of fellow shoppers you see that “other people buy weird stuff”, or at least that they buy different items from you.
The few items in common in any two trolleys are, of course, most likely to be those items that sell in large volumes. These will appear in many more people’s trolleys. Even so most of the items in our trolley will not be from the ‘top 1000’ and so hardly anyone else will buy them.
The Double Jeopardy Law tells us that an item with low market share will be repeat-bought less often than its rivals, but not dramatically less often, the main reason that it sells so little is that few people ever buy it. Which means that many of the many low selling items in a supermarket are, in effect, being stocked for just a few consumers. Some may even be stocked for a single household. But for these few buyers these items are important, they buy them, maybe not that often (but that’s true of most things we buy), they know them, they are in their heads and their pantries – but not many other people’s.
Because we buy these items we like stores that stock them. We each enter a store looking for “our stuff”. If the store doesn’t stock the things we buy we can sometimes find ourselves inconvenienced. We want to see, and be able to find, the items of interest to us. That makes a store attractive to us. Fortunately for store managers consumers are extraordinarily good at filtering out all the brands and SKUs that aren’t in their personal repertoire and finding their brands. Successful stores make this even easier for consumers.
So my point is don’t make the mistake of thinking that a store can do without 90%+ of its range. Stores compete for shoppers, and shoppers vary enormously in what they look for, in what mental structures are in their head, in what they see. Each of us has a very different opinion on what the store should stock. To win us all stores need a wide range.