Thursday, June 17, 2010

One pen will do (part 1)

I needed a pen. Simple basic writing instrument. Blue ink. Fine point. Roller ball. How hard is that? So here I was, cruising into one of those mega office supply store (remember when they used to be called stationery stores?) Walking in, past the printers and faxes and software, I found the aisle marked "writing Instruments". Heading down the echoing corridor of pens, I was baffled and bewildered. 12 linear feet of pens! 8 feet into the sky. Suddenly I felt a consumerist panic attack. Which one to choose? what should I buy?

Examining each of the many many selections and muttering to myself that I just want a basic pen, I felt my inner Dr Seuss come out.

One pen, two pen, three pen four.
Red pen, blue pen, green pens more.
Boxed and pegged and blister packed galore
Can't make a choice so buy out the store!

As I sang my own personal Seussical, I finally chose something, much to relief of the slightly edgy staff member that was watching. I purchased my one pen, beating a hasty exit, worried that I might get home to find that I needed a pencil, but leaving that 12 foot dilemma to another day. Thinking (and singing), I uncapped my pen and wrote with the first drops of ink:


Now consumerist choice is a great thing. It's one of the tenants of a free society. No Soviet era lineups to buy one size 8 and one size 7 shoe in America. If you have the means, your choice of products is endless. Products come in all shapes, sizes, colors, styles and price points. Just consider; the average supermarket has grown by a third in 15 years, and stocks more that 45,000 items. The dizzying array of products is mind numbing.

Not all this choice is great though. Retailers, manufacturers and advertisers have sold us on choice being a good thing. The adage being, as a retailer, if you offer a huge variety, customers will buy something. If you offer 49 different types of highlighters, then you satisfy every customer need and want. But recent research shows that this business practice is counter intuitive. The more choice you give, the more customer confusion and uncertainty. The result? actually less sales over all as customers choose to NOT choose and leave empty handed.

WalMart - The bastion of product analysis, recently discovered this. Needing room on their shelves for, of all things, cinnamon spreads, they decided to drop two of their five brands of peanut butter. What did they discover? They sold MORE of the existing three brands than when they had five on the shelves. The WalMart chief merchandiser recognized a new adage in selection - increase variety, and customers don't buy.

A major grocery chain in the US tried a similar exercise, culling 10% of their slow moving products. Existing products increased in sales, and the grocer found many savings in reducing product selection. Yet, it is a bit hit and miss. While some products were not missed, others taken off the shelves created some negative backlash from customers.

Finally, I thought of Costco as the ubiquitous retailer of edited selection. The Costco model is all about selling a large volume of a few products. Not much selection. The top products are carried by Costco, and if you want some variety, you need to look to your favorite neighborhood grocer. Ted (not his real name), a manager at Costco agreed. He talked about the analysis, matrix and sales data that Costco head office performs to decide on product selection. Fierce criteria is used in analysis. Not selling through? Delete the product and replace. It's a clear single minded focus on sell through with as little product selection as possible.

So it is clear that there is a lot of evidence to support editing product selection. Carefully reducing variety can increase sales and reduce costs. How does this apply to campus retail? Well next time we will take a look at the campus store experience, and how using these big box retailer experiences can help the profitability of any campus retail operation.

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