Streamlining product selections could spell trouble for CPG retailers

LAS VEGAS Consumers likely will take their business elsewhere if they notice a reduced product selection at a store, according to new research released by Nielsen.

The new insights, announced at Nielsen's Consumer 360 Conference on Tuesday, were pulled from a survey of 50 retailers across consumer packaged good channels and consumers in more than 21,000 households that conducted nearly 55,000 shopping trips. The survey also addressed that as retailers will downsize their product assortments -- 42% of them scaled back in mid-2009 -- if shoppers do not find what the item they want, the likelihood they will take their business elsewhere could be extremely costly for retailers. Nielsen cited that 7% of personal care shoppers will not purchase any item at a store if they cannot find the product they initially sought to purchase. According to Nielsen, a loss of just one-half percent in “closure” can lead to a loss of $1.5 billion in sales.

“Reduced assortments are definitely here to stay, and the message to retailers is to choose carefully when it comes to deciding which products to trim,” said Stuart Taylor, VP custom analytics for The Nielsen Co. “In many cases, strategically reducing assortment can result in an improved customer experience and greater profitability. Cut the wrong product, however, and the potential customer backlash could be costly.”

According to Nielsen, 75% of retailers are downsizing their product assortment to improve merchandising opportunities, while 71% cite a desire for greater control over inventory. Sixty percent state the moves are made to alleviate shopper confusion, while 52% are reducing selection to cut costs and improve profitability. Nearly half (48%) of retailers are making more room for store-brand products.

“Success in today’s competitive retail market is no longer about having the most products -- it’s about finding the right mix of products,” said Taylor. “Retailers should be focused on offering the products their customers want most and making it as easy as possible for their customers to find and purchase those products.”