'The mass-market approach doesn't work anymore; retailers need to shrink to grow': IRI

By David Burrows

- Last updated on GMT

Bewildered by choice: 'These days the world won’t accept six or seven different pack sizes of the same product,' said Hall.  Photo: iStock
Bewildered by choice: 'These days the world won’t accept six or seven different pack sizes of the same product,' said Hall. Photo: iStock

Related tags: Retailing

Bigger ranges mean bigger sales, right? Wrong. Retailers right across the EU are undergoing a “range re-set programme” and the general target is a reduction of 30%, according to IRI.

There are a number of reasons for the decline in assortment, not least consumer demand for easy-to-navigate stores and the opportunity to save money in production. A shrink can also make money – IRI claims that double-digit growth is possible at a local level by “optimising assortment”​ through the use of big data analytics.

There have been several years of high assortment increase in many countries, albeit at different paces, IRI noted in its Shrink to grow ​whitepaper. In the past year, however, trends are shifting toward a reduction of the assortment growth “or even an absolute decline in the number of stock-keeping units (SKUs). This is not a universal move, but suggests a general trend.”

Manufacturers would do well to take note, explained Thomas Hall, IRI analytics programme director. “We’re seeing a desire to do this across all countries,”​ he told FoodNavigator.

Mass market mayhem

The report​ noted that the mass-market approach “does not work anymore” –​ customers are demanding customisation and choice. It’s a tough balancing act, highlighted by FMCG Shopperscan data from France. That research showed how in 2013 21% of shoppers said it was difficult to find products because of the number of options, but this increased to 38% in 2015. However, only 17% of consumers felt there are too many items on shelves.

Any culling of SKUs needs to be rational, therefore, with range adjusted or reduced “in the most relevant way for local customers”,​ IRI noted.

Analysis across different stores, categories and countries shows how category revenue can rocket through optimisation – up to 14.2% in frozen fish for one retail group in France and 9.5% across margarines for a Spanish chain. category sales performance can achieve double-digit growth by optimising assortment according to local shopper habits,”​ IRI claimed.

This is where big data analytics comes in, offering retailers and manufacturers much deeper insight. Hall explained how grocers would traditionally rank SKUs on rates of sales and “chop off the bottom 10%”.​ This method often hit niche products, like Fairtrade, organic and free-from, but this can easily push customers away.

“If a customer can’t find gluten-free bread we might not be talking about losing £1.50 but £50 if the consumer takes their entire shop elsewhere,”​ said Hall.

Brands can therefore use big data to prove their products should be in the retailer’s range. “Retailers, more and more, will be demanding this,”​ Hall added.

IRI claimed that it’s time for manufacturers to work with retailers to define the real value of a brand or product presence according to what is really impacting the shopper’s propensity to purchase. The insight gained from analytics and technology will help manufacturers rationalise their ranges in line with local demands, saving money in everything from production to marketing.

“These days the world won’t accept six or seven different pack sizes of the same product manufacturers need to come up with something new that gives a unique benefit to the customer,”​ Hall explained.

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