Opinion: produce variety drives reduced sales and shrink

March 06 , 2012

By perishable profit management consultant and former Schnucks Markets senior marketing and merchandising vice-president Randy Wedel.

It is conventional wisdom in the supermarket industry that variety is good, and leads to increased sales and consumer satisfaction.  Within very modest limits, I agree with that, but a growing number of retailers, as well as grower/shippers, are stretching the upper limits of variety and actually getting the opposite of the desired result.

Space is at a premium in most supermarkets.  That is especially true in a high volume produce department.  In a strategy designed to differentiate their offerings from the competition, a large number of retailers are relying on a ridiculous number of items and variety of items.

The result is the really key seasonal items are displayed in reduced volumes and the balance of the department is filled with slow moving varieties or items that are clogging the system.  This leads to a dynamic that increases days of supply on hand, increases shrink and pitch, and generally reverses the desired trend of high volume turnover for maximum freshness.

Growers share the responsibility.  They set no limits on how many varieties they are willing to grow and supply. For example, how many plum varieties are needed in a season?  I say, only the ones that provide unique taste alternatives.  Having more, and more, is not always the answer.

Retailers are also caught up in significant duplication of items.  Examples include, but are not limited to; bag salads of many mixtures, but also the individual ingredients of those salads and organic offerings, but with their conventionally grown counterparts also in the department.

The end result is that high volume seasonal items do not receive the attention they deserve.  Perhaps a little common sense in the number of varieties produced and displayed would serve our industry well.  There is a hidden enemy to the variety strategy that often goes untracked.

As variety goes up, shrink and pitch go up with it.  This means that the end result for the retailer is reduced profits, not increased as the strategy purports.  This sends the retailer in a downward spiral of increased shrink and pitch, leading to increased retails to cover the loss, and increased retails leading to greater shrink.  The significant margin pressure at retail, caused by our very competitive retail environment has already done significant harm to the price structure of perishables.  Now the retailer is absorbing additional damage that is self imposed.

As with most industry issues, this calls for greater collaboration between grower/suppliers and retailers.  If the retailer keeps good records and reacts to the trends, they can minimize the harm.  Sharing this information with key supplier/partners makes a great deal of sense.  Collaboration and partnership need not interfere with fair negotiation on price.  There are gains to be made on both sides of the equation.

Twenty years ago a typical supermarket produce department merchandised about 150 items.  Today, totals of 750-1000 items are not uncommon.  Obviously this has a big effect on the ability to sell produce.  As an industry, we need to be sure it is not an undesired effect.   Maybe it is time for moderation in the explosion of items, and the expansion of variety.

También podría interesarte

Leave a Reply

Your email address will not be published. Required fields are marked *