Sku rationalization in convenience retail

NACS/BALVOR SKU RATIONALIZATION SURVEY

May 2010

Retail Participant Summary

117 South Cook Street #339
Barrington, Illinois 60010
phone: 847.722.2732
fax: 847.382.1801
Copyright © 2010 Balvor LLC. All Rights Reserved. davidbishop@balvor.com

Retailers completed the online survey between
2/25/10 and 3/1/10

Number of Stores Operated
(Percent of Respondents)

500+ Stores,
10.5%
201 - 500 Stores, 9.8%

1 - 10 Stores, 30.1%

51 - 200 Stores,
15.8%

11 - 50 Stores, 33.8%

Q: How many store do you currently operate? (n=133)
Source: NACS/Balvor SKU Rationalization Survey, March 2010.

Copyright © 2010 Balvor LLC. All Rights Reserved. 2

While 30 percent of convenience retailers offer more than
4,000 SKU per store, the average is just over 3,000

Average Number of SKUs Offered Per Store
22.9%

Weighted Average based on store count
19.1%
3,011

15.5%
14.5%
12.6%

8.5%
6.6%

0.3%

1,000 or Less 1,001 to 1,500 1,501 to 2,000 2,001 to 2,500 2,501 to 3,000 3,001 to 3,500 3,501 to 4,000 4,001 or More

Q: How many unique products does/do your store(s) carry on average across all categories sold inside the store, at any point in time? (n=133)


Over 70 percent of the retailers indicated that the number of
products offered has increased over the last 5 years

Change in SKU Counts Offered Inside the Store
Don't Know, 1.5%

Remained
the Same,
12.0%

Decreased, 14.3%

Increased, 72.2%

Q: Over the last five (5) years, on a per store basis, the number of products/SKUs offered has…? (n=133)


RETAILER PERSPECTIVE

Given convenience retail is not the same as big-box retailing, find out what “SKU
rationalization” means to convenience retailers. And, even though convenience is different,
learn how convenience retailers are likely to handle freed up space if they did end up
discontinuing products. Lastly, understand what the primary factors are that would explain
why retailers are offering so many low-volume products.

Copyright © 2010 Balvor LLC. All Rights Reserved.

Most convenience retailers view SKU rationalization as a way
to offer the right products as opposed to reduce SKU count
as is the case in larger retail formats
Retailer Perception About SKU Rationalization

Offering the correct mix of products. 59.7%

Determining the right number of products to carry. 31.1%

Other (please specify) 5.0%

Reducing the absolute number of products carried. 4.2%

Q: When you hear the term "SKU rationalization," which one of the following best represents what it means to you? (n=119)


More retailers are likely to use freed up space to strengthen
the in-stock position of top-sellers in the largest destination
categories if they removed existing SKUs
Retailers That Would Give More Space to Category Top-Sellers

51.5% 50.0%

35.0%
33.3%
27.2% 26.6% 26.1%

18.0%
16.4%

Cigarettes Beer OTP Packaged Salty Snacks Packaged Ice Candy Health & General
Beverages Cream Beauty Care Merchandise
(na)

Q: If you removed existing SKUs in the following categories, what would you most likely do with freed up space? (n=119)


Over half of the retailers are likely to add new products in
snacking categories if they removed existing SKUs

Retailers That Would Add New Products to Category

58.8%
55.0% 54.8%
52.3%
48.0%
45.0%

34.5% 34.2%

23.3%

Salty Snacks Packaged Ice Candy Packaged OTP Beer General Health & Cigarettes
Cream Beverages Merchandise Beauty Care
(na)



Nearly half of the retailers would shift space from the low-
share categories elsewhere if they removed existing SKUs

Retailers That Would Shift Space Away From the Category

49.1% 47.7%

25.2%
19.1% 18.3% 17.0%
14.4% 14.0%

5.0%

General Health & Cigarettes Candy Packaged Ice OTP Packaged Salty Snacks Beer
Merchandise Beauty Care Cream Beverages
(na)



Overview of what convenience retailers would do with freed
up space related to removing existing SKUs

Give more space to top- Use space to add new Shift space to another
Category sellers in the category products in the category category

Cigarettes 51.5% 23.3% 25.2%

Beer 50.0% 45.0% 5.0%

Packaged Beverages (na) 33.3% 52.3% 14.4%

Salty Snacks 27.2% 58.8% 14.0%

OTP 35.0% 48.0% 17.0%

Candy 26.1% 54.8% 19.1%

General Merchandise 16.4% 34.5% 49.1%

Health & Beauty Care 18.0% 34.2% 47.7%

Packaged Ice Cream 26.6% 55.0% 18.3%



Nearly all retailers agree that serving their customers is a key
factor explaining why many low-volume products are
offered in their stores
Retailer Level of Agreement
(Percent of Respondents Agreeing with Statements)
Top-Two

Serve valued customers that shop the store(s) 42.0% 46.2% 88.2%

Ensure that we offer a complete variety 30.3% 45.4% 75.6%

Remain compliant with manufacturer contracts 26.1% 47.1% 73.1%

Maintain comparable assortments as key competitors 16.8% 50.4% 67.2%

Be eligible for additional monies from supplier 18.5% 41.2% 59.7%

Completely Agree Somewhat Agree

Q: Please indicate your level of agreement with the following statements. You carry many of the lower-volume products in your store(s) in order to… (n=119)


RETAILER PRACTICES

Understand how often other retailers are reviewing assortment and what tools, techniques,
and performance metrics they are using to support the decision-making process.

Copyright © 2010 Balvor LLC. All Rights Reserved.

Retailers are typically completing semi-annual resets for
larger categories while many are adjusting even more
frequently in high-share categories
Assortment Review Frequency
(Number per Year) Wtd. Avg.

High-Share Categories 13.8% 45.0% 33.0% 8.3% 2.1x/yr

Moderate-Share Categories 6.4% 36.7% 52.3% 4.6% 1.8x/yr

Low-Share Categories 2.8% 22.9% 54.1% 20.2% 1.3x/yr

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0%

4+ Times per Year 2-3 Times per Year 1 Time per Year Less than 1 Time per Year

Q: How often do you make major adjustments to product assortment in your store(s)? (n=109)


The range of clustering techniques employed by retailers
expands as the number of stores operated increases

Prevalence of Store Clustering Techniques
(Percent of Retailer Indicating “Yes”)

88.9%
82.4%
77.8%
75.0% 74.4%
67.5% 66.7%
60.5%

44.4%
38.5%
30.3% 30.3%
27.3% 27.3%
21.2%

By geography By trade area By demographics By category set size By store type

1 - 10 Stores 11 - 50 Stores 51+ Stores

Q: Do you use any of the following store clustering techniques to adjust product assortment among your stores? (n=109)


Most retailers use internal sales data to support assortment
decisions while broader data sources vary by number of stores
operated – especially related to wholesale and syndicated data

Use of Various Data Sources to Support Assortment Reviews
(Percent of Retailers Responding “Always” or “Most of the Time”)
100.0%
90.9%
85.0%

72.5%
63.9%
60.6%
50.0%

30.0%
22.5%
18.2% 19.4%
15.2% 13.9% 15.0% 16.7%
12.1%
5.0% 6.1%

Internal sales data Wholesaler Syndicated sales Consumer panel Market basket data Purchase decision
shipment data data data tree research

1 - 10 Stores 11 - 50 Stores 51+ Stores

Q: How often do you use the following information sources when making decisions about product assortment in your stores? (n=109)


Unit volume – a proxy for consumer demand – is the most
often used metric when determining what products to offer

Key Metrics Used When Making Assortment Decisions
(Percent of Retailers Indicating “Always” or Most of the Time”)

Unit volume contribution 85.3%

Dollar sales contribution 79.8%

Gross profit contribution 76.1%

Gross profit per unit sold 62.0%

Gross margin percent 50.9%

Q: What data metrics do you often use when making decisions about which products to remove from your store? (n=109)


Background and Contact Information

Balvor LLC is a sales and marketing firm that provides David Bishop
a range of consulting, sales support, and analytic Managing Partner
services to leading retailers, product suppliers, P: 847.722.2732
financial analyst, and other organizations. davidbishop@balvor.com
In convenience, Balvor works primarily with senior
marketing and merchandising teams that are
interested in developing more effective David specializes in small-format retailing and his
merchandising guidelines, enhancing collaborative focus in convenience crosses foodservice and
supplier practices, and evaluating various in-store merchandise categories. He’s examined various
programs and practices. strategic topics impacting the business, including:
In addition to the SKU rationalization survey, Balvor • Tobacco outlook & practices (‘10)
has examined retail trends and practices in
foodservice, private label, and tobacco for either • Motor fuel retailing trends & outlook (‘10),
NACS or other trade organizations. • Youth access prevention to tobacco at retail (‘09),
During May and June of 2010, David is examining how
• Private label trends & practices in convenience (‘08)
convenience retailers are adapting foodservice
strategies in collaboration with Convenience Store David is currently a member of CSD’s Supplier
Decisions. Advisory Board and NACS’ Convention & Events
Committee.


Sku rationalization in convenience retail

Recomendados

Recomendados

Mais conteúdo relacionado

Mais procurados

Mais procurados (20)

Semelhante a Sku rationalization in convenience retail

Semelhante a Sku rationalization in convenience retail (20)

Mais de Balvor LLC

Mais de Balvor LLC (17)

Último

Último (20)

Sku rationalization in convenience retail