NACS/BALVOR SKU RATIONALIZATION SURVEY                                                                                  Ma...
Retailers completed the online survey between                            2/25/10 and 3/1/10                               ...
While 30 percent of convenience retailers offer more than     4,000 SKU per store, the average is just over 3,000         ...
Over 70 percent of the retailers indicated that the number of    products offered has increased over the last 5 years     ...
RETAILER PERSPECTIVE Given convenience retail is not the same as big-box retailing, find out what “SKU rationalization” me...
Most convenience retailers view SKU rationalization as a way to offer the right products as opposed to reduce SKU count   ...
More retailers are likely to use freed up space to strengthenthe in-stock position of top-sellers in the largest destinati...
Over half of the retailers are likely to add new products in     snacking categories if they removed existing SKUs        ...
Nearly half of the retailers would shift space from the low- share categories elsewhere if they removed existing SKUs     ...
Overview of what convenience retailers would do with freed         up space related to removing existing SKUs             ...
Nearly all retailers agree that serving their customers is a key   factor explaining why many low-volume products are     ...
RETAILER PRACTICES Understand how often other retailers are reviewing assortment and what tools, techniques, and performan...
Retailers are typically completing semi-annual resets for        larger categories while many are adjusting even more     ...
The range of clustering techniques employed by retailers      expands as the number of stores operated increases          ...
Most retailers use internal sales data to support assortment  decisions while broader data sources vary by number of store...
Unit volume – a proxy for consumer demand – is the mostoften used metric when determining what products to offer          ...
Background and Contact InformationBalvor LLC is a sales and marketing firm that provides               David Bishopa range...
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Sku rationalization in convenience retail

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Results of a retail trade survey that examines how convenience retailer in the U.S. view and approach SKU rationalization.

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Sku rationalization in convenience retail

  1. 1. NACS/BALVOR SKU RATIONALIZATION SURVEY May 2010 Retail Participant Summary 117 South Cook Street #339 Barrington, Illinois 60010 phone: 847.722.2732 fax: 847.382.1801 Copyright © 2010 Balvor LLC. All Rights Reserved. davidbishop@balvor.com
  2. 2. Retailers completed the online survey between 2/25/10 and 3/1/10 Number of Stores Operated (Percent of Respondents) 500+ Stores, 10.5% 201 - 500 Stores, 9.8% 1 - 10 Stores, 30.1% 51 - 200 Stores, 15.8% 11 - 50 Stores, 33.8%Q: How many store do you currently operate? (n=133)Source: NACS/Balvor SKU Rationalization Survey, March 2010. Copyright © 2010 Balvor LLC. All Rights Reserved. 2
  3. 3. While 30 percent of convenience retailers offer more than 4,000 SKU per store, the average is just over 3,000 Average Number of SKUs Offered Per Store (Percent of Respondents) 22.9% Weighted Average based on store count 19.1% 3,011 15.5% 14.5% 12.6% 8.5% 6.6% 0.3% 1,000 or Less 1,001 to 1,500 1,501 to 2,000 2,001 to 2,500 2,501 to 3,000 3,001 to 3,500 3,501 to 4,000 4,001 or MoreQ: How many unique products does/do your store(s) carry on average across all categories sold inside the store, at any point in time? (n=133)Source: NACS/Balvor SKU Rationalization Survey, March 2010. Copyright © 2010 Balvor LLC. All Rights Reserved. 3
  4. 4. Over 70 percent of the retailers indicated that the number of products offered has increased over the last 5 years Change in SKU Counts Offered Inside the Store (Percent of Respondents) Dont Know, 1.5% Remained the Same, 12.0% Decreased, 14.3% Increased, 72.2%Q: Over the last five (5) years, on a per store basis, the number of products/SKUs offered has…? (n=133)Source: NACS/Balvor SKU Rationalization Survey, March 2010. Copyright © 2010 Balvor LLC. All Rights Reserved. 4
  5. 5. RETAILER PERSPECTIVE Given convenience retail is not the same as big-box retailing, find out what “SKU rationalization” means to convenience retailers. And, even though convenience is different, learn how convenience retailers are likely to handle freed up space if they did end up discontinuing products. Lastly, understand what the primary factors are that would explain why retailers are offering so many low-volume products. Copyright © 2010 Balvor LLC. All Rights Reserved.
  6. 6. Most convenience retailers view SKU rationalization as a way to offer the right products as opposed to reduce SKU count as is the case in larger retail formats Retailer Perception About SKU Rationalization (Percent of Respondents) Offering the correct mix of products. 59.7%Determining the right number of products to carry. 31.1% Other (please specify) 5.0%Reducing the absolute number of products carried. 4.2%Q: When you hear the term "SKU rationalization," which one of the following best represents what it means to you? (n=119)Source: NACS/Balvor SKU Rationalization Survey, March 2010. Copyright © 2010 Balvor LLC. All Rights Reserved. 6
  7. 7. More retailers are likely to use freed up space to strengthenthe in-stock position of top-sellers in the largest destination categories if they removed existing SKUs Retailers That Would Give More Space to Category Top-Sellers (Percent of Respondents) 51.5% 50.0% 35.0% 33.3% 27.2% 26.6% 26.1% 18.0% 16.4% Cigarettes Beer OTP Packaged Salty Snacks Packaged Ice Candy Health & General Beverages Cream Beauty Care Merchandise (na)Q: If you removed existing SKUs in the following categories, what would you most likely do with freed up space? (n=119)Source: NACS/Balvor SKU Rationalization Survey, March 2010. Copyright © 2010 Balvor LLC. All Rights Reserved. 7
  8. 8. Over half of the retailers are likely to add new products in snacking categories if they removed existing SKUs Retailers That Would Add New Products to Category (Percent of Respondents) 58.8% 55.0% 54.8% 52.3% 48.0% 45.0% 34.5% 34.2% 23.3%Salty Snacks Packaged Ice Candy Packaged OTP Beer General Health & Cigarettes Cream Beverages Merchandise Beauty Care (na)Q: If you removed existing SKUs in the following categories, what would you most likely do with freed up space? (n=119)Source: NACS/Balvor SKU Rationalization Survey, March 2010. Copyright © 2010 Balvor LLC. All Rights Reserved. 8
  9. 9. Nearly half of the retailers would shift space from the low- share categories elsewhere if they removed existing SKUs Retailers That Would Shift Space Away From the Category (Percent of Respondents) 49.1% 47.7% 25.2% 19.1% 18.3% 17.0% 14.4% 14.0% 5.0% General Health & Cigarettes Candy Packaged Ice OTP Packaged Salty Snacks BeerMerchandise Beauty Care Cream Beverages (na)Q: If you removed existing SKUs in the following categories, what would you most likely do with freed up space? (n=119)Source: NACS/Balvor SKU Rationalization Survey, March 2010. Copyright © 2010 Balvor LLC. All Rights Reserved. 9
  10. 10. Overview of what convenience retailers would do with freed up space related to removing existing SKUs Give more space to top- Use space to add new Shift space to anotherCategory sellers in the category products in the category category Cigarettes 51.5% 23.3% 25.2% Beer 50.0% 45.0% 5.0% Packaged Beverages (na) 33.3% 52.3% 14.4% Salty Snacks 27.2% 58.8% 14.0% OTP 35.0% 48.0% 17.0% Candy 26.1% 54.8% 19.1% General Merchandise 16.4% 34.5% 49.1% Health & Beauty Care 18.0% 34.2% 47.7% Packaged Ice Cream 26.6% 55.0% 18.3% Q: If you removed existing SKUs in the following categories, what would you most likely do with freed up space? (n=119) Source: NACS/Balvor SKU Rationalization Survey, March 2010. Copyright © 2010 Balvor LLC. All Rights Reserved. 10
  11. 11. Nearly all retailers agree that serving their customers is a key factor explaining why many low-volume products are offered in their stores Retailer Level of Agreement (Percent of Respondents Agreeing with Statements) Top-Two Serve valued customers that shop the store(s) 42.0% 46.2% 88.2% Ensure that we offer a complete variety 30.3% 45.4% 75.6% Remain compliant with manufacturer contracts 26.1% 47.1% 73.1%Maintain comparable assortments as key competitors 16.8% 50.4% 67.2% Be eligible for additional monies from supplier 18.5% 41.2% 59.7% Completely Agree Somewhat AgreeQ: Please indicate your level of agreement with the following statements. You carry many of the lower-volume products in your store(s) in order to… (n=119)Source: NACS/Balvor SKU Rationalization Survey, March 2010. Copyright © 2010 Balvor LLC. All Rights Reserved. 11
  12. 12. RETAILER PRACTICES Understand how often other retailers are reviewing assortment and what tools, techniques, and performance metrics they are using to support the decision-making process. Copyright © 2010 Balvor LLC. All Rights Reserved.
  13. 13. Retailers are typically completing semi-annual resets for larger categories while many are adjusting even more frequently in high-share categories Assortment Review Frequency (Number per Year) Wtd. Avg. High-Share Categories 13.8% 45.0% 33.0% 8.3% 2.1x/yrModerate-Share Categories 6.4% 36.7% 52.3% 4.6% 1.8x/yr Low-Share Categories 2.8% 22.9% 54.1% 20.2% 1.3x/yr 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% 4+ Times per Year 2-3 Times per Year 1 Time per Year Less than 1 Time per Year Q: How often do you make major adjustments to product assortment in your store(s)? (n=109) Source: NACS/Balvor SKU Rationalization Survey, March 2010. Copyright © 2010 Balvor LLC. All Rights Reserved. 13
  14. 14. The range of clustering techniques employed by retailers expands as the number of stores operated increases Prevalence of Store Clustering Techniques (Percent of Retailer Indicating “Yes”) 88.9% 82.4% 77.8% 75.0% 74.4% 67.5% 66.7% 60.5% 44.4% 38.5% 30.3% 30.3% 27.3% 27.3% 21.2% By geography By trade area By demographics By category set size By store type 1 - 10 Stores 11 - 50 Stores 51+ StoresQ: Do you use any of the following store clustering techniques to adjust product assortment among your stores? (n=109)Source: NACS/Balvor SKU Rationalization Survey, March 2010. Copyright © 2010 Balvor LLC. All Rights Reserved. 14
  15. 15. Most retailers use internal sales data to support assortment decisions while broader data sources vary by number of stores operated – especially related to wholesale and syndicated data Use of Various Data Sources to Support Assortment Reviews (Percent of Retailers Responding “Always” or “Most of the Time”) 100.0% 90.9% 85.0% 72.5% 63.9% 60.6% 50.0% 30.0% 22.5% 18.2% 19.4% 15.2% 13.9% 15.0% 16.7% 12.1% 5.0% 6.1% Internal sales data Wholesaler Syndicated sales Consumer panel Market basket data Purchase decision shipment data data data tree research 1 - 10 Stores 11 - 50 Stores 51+ StoresQ: How often do you use the following information sources when making decisions about product assortment in your stores? (n=109)Source: NACS/Balvor SKU Rationalization Survey, March 2010. Copyright © 2010 Balvor LLC. All Rights Reserved. 15
  16. 16. Unit volume – a proxy for consumer demand – is the mostoften used metric when determining what products to offer Key Metrics Used When Making Assortment Decisions (Percent of Retailers Indicating “Always” or Most of the Time”)Unit volume contribution 85.3%Dollar sales contribution 79.8%Gross profit contribution 76.1%Gross profit per unit sold 62.0% Gross margin percent 50.9%Q: What data metrics do you often use when making decisions about which products to remove from your store? (n=109)Source: NACS/Balvor SKU Rationalization Survey, March 2010. Copyright © 2010 Balvor LLC. All Rights Reserved. 16
  17. 17. Background and Contact InformationBalvor LLC is a sales and marketing firm that provides David Bishopa range of consulting, sales support, and analytic Managing Partnerservices to leading retailers, product suppliers, P: 847.722.2732financial analyst, and other organizations. davidbishop@balvor.comIn convenience, Balvor works primarily with seniormarketing and merchandising teams that areinterested in developing more effective David specializes in small-format retailing and hismerchandising guidelines, enhancing collaborative focus in convenience crosses foodservice andsupplier practices, and evaluating various in-store merchandise categories. He’s examined variousprograms and practices. strategic topics impacting the business, including:In addition to the SKU rationalization survey, Balvor • Tobacco outlook & practices (‘10)has examined retail trends and practices infoodservice, private label, and tobacco for either • Motor fuel retailing trends & outlook (‘10),NACS or other trade organizations. • Youth access prevention to tobacco at retail (‘09),During May and June of 2010, David is examining how • Private label trends & practices in convenience (‘08)convenience retailers are adapting foodservicestrategies in collaboration with Convenience Store David is currently a member of CSD’s SupplierDecisions. Advisory Board and NACS’ Convention & Events Committee. Copyright © 2010 Balvor LLC. All Rights Reserved. 17

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