Getting SKU rationalization right
Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine. A long-time Harris Teeter executive, Mr. Harris is a former chairman of the National Frozen & Refrigerated Foods Association and a member of the Refrigerated Foods Hall of Fame.
SKU rationalization can make or break your department but there are ways to do it while limiting the disappointment of scratched items to many of your customers.
Here are some tips to help you get it right:
1. Set a benchmark. When I was a category manager, I had a rule of thumb that said if a SKU didn’t sell a half a case a week per store, it was subject to being cut. If I got too many complaints, I’d put it back.
2. Don’t be afraid to make a decision out of fear you’ll be second-guessed from above. You’ve got to keep trying new programs, new ideas. If the boss gets on you too hard, all you have to do is say "I’ll fix it."
3. Go with your gut. Special item requests by customers are not easy to execute. I’ve always believed that if an item is slow for you, it’s probably also slower for your competition and even the manufacturer. It really should be up to the manufacturer to get rid of it — it’ll save a lot of grief for everyone.
4. Go easy on carrying multiple sizes of everything. Do you really need three sizes of parmigiana cheese or Velveeta? You may decide to get rid of the smallest size and let those shoppers go to 7-Eleven. They aren’t likely to buy a lot of groceries anyway, and you really have to get rid of duplication.
5. Accept new items when they come out without waiting six months for a formal category review. If you review a category once or twice a year, that’s fine. But don’t shut down the possibility of profiting from something new just because you want to wait for your next category review.
6. Don’t lock into two brands and a private label per category. If I have to have 15 brands of yogurt to satisfy my customers and keep them loyal, so be it. Do I carry every item they have? No. Do I carry half of them? Maybe. Don’t send your customers away.
7. Bring in new products based solely on their merits and nothing more. Lots of times, if a category manager doesn’t like a particular manufacturer or broker rep, the item just doesn’t get authorized. That happens a lot. This can really hurt your business. Have I ever done that? Yes. Was I wrong? Definitely. Eventually, I had to add the product anyway.
What are the most common mistakes made when it comes to SKU rationalization at retail? Would you add any tips to effectively managing SKUs to those offered in the article?