Smaller Selection - Higher Profits?

Aug 01 2016


According to one senior VP of E-commerce at retail powerhouse Costco, "We will never have hundreds of thousands of SKUs. We have the same discipline online as we do in the warehouse, and you cannot really be best at what you are doing if you have too much to manage." 

Avon Cosmetics’ senior VP for North America, Pablo Munoz, commented on the decision to focus on best sellers as part of a strategy to boost sales in 2014. “A smaller assortment of Avon products will help lower production and printing costs. A more focused assortment will also help sales representatives because they will have fewer products to learn how to demonstrate.”

Barry Berman of The Retail Intelligence notes several supermarket chains that successfully reduced their selections to the most popular and best-selling items: Aldi (1,400 SKUs per store), Costco (3,300 - 3,800 SKUs), Stew Leonard's (2,000 SKUs), and Trader Joe's (2,500-3,000 SKUs). In comparison, the average supermarket stocks between 30,000 and 52,000 SKUs!

While your business may not quite be Trader Joe’s or Avon, this simple, powerful, strategy is scalable from the largest to the smallest business.

How can limiting product choice and promoting best sellers improve profits?

  1. Higher stock turnover results from eliminating slow-selling items to promote best sellers
  2. There’s a lower risk of running out of an item, the fewer items you stock
  3. Ordering larger quantities of best sellers gives you leverage with vendors
  4. Lower costs by leasing smaller stores, increasing sales per square feet, by eliminating unpopular items
  5. Lower staff costs associated with pricing, record-keeping, and inventory maintenance

 “Why Choice Is Demotivating”

It’s logical to conclude that if you can turn a profit on niche products, you might make more money selling a larger array, but it turns out this isn’t proven by research!

Did you know that consumers are more likely to buy jams from a seller offering a selection of no more than half a dozen than they would be if they were offered 24 or 30 choices? Or that a college student is more likely to do an extra-credit essay from a shorter list of topics instead of having 30 to choose from?

In the world of business, it's been accepted as desirable to offer consumers more and more options.

That's exactly the assumption that professors Sheena Iyengar and Mark Lepper of Columbia University sought to prove. The social scientists discovered the opposite in their famous study “Why Choice Is Demotivating,” which includes the discoveries above. Douglas Coupland called the confusion of too many choices ‘option paralysis’ in his 1991 novel Generation X 

The team at Wald Imports will work with you to stock the best-selling, most unique items for YOUR customer

Customers will return to your store over and over again if they know they can get what they won’t find elsewhere. Develop a niche for products YOUR customers love. If your store is the only one in town that sells hand-knit sweaters, for example, then customers will begin to think of you when they’re looking for a sweater with local flair for an out-of-town friend or relative. Look back at what your customers have preferred, and base your purchasing decisions on their preferences. The Wald Imports team will work with you to develop best sellers that your clients can count on.

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