To survive in today’s economy, retailers and vendors must determine which SKUs (stock keeping units) are selling and get rid of non-performing brands and products, according to two experts with Barrington, Ill.-based consulting firm Willard Bishop.
“The need to simplify and streamline is going to drive significant change in these turbulent times. Retailers really need to look at line extensions of flavors and brands and decide what value they are adding to their shoppers,” said Jim Hertel, managing partner of Willard Bishop.
Hertel and Craig Rosenblum, a partner in Willard Bishop, recently presented food retailing strategies during a webinar sponsored by the Food Institute of Elmwood Park, N.J.
Already, the retailers that have streamlined their SKUs and focused on top-selling items are the ones that are growing in this difficult economic environment, according to Hertel and Rosenblum. “Limited-assortment” chains — such as Aldi, which is based in Germany and is rapidly expanding throughout the United States, and Save-A-Lot, owned by SuperValu in Minneapolis — are among the United States’ fastest growing supermarket chains.
“Limited-assortment stores are growing by 14.3 percent a year. Compared to traditional retailers, Aldi, Save-A-Lot and Trader Joe’s are offering prices that are around 40 percent lower,” said Rosenblum.
These chains offer new opportunities primarily for canned and private-label seafood suppliers.
“Aldi’s and Save-A-Lot’s strengths have really been in center-store staples, so canned seafood should benefit,” said Hertel.
In addition, Wal-Mart, the United States’ largest food retailer, has implemented what it calls a “win, play, show” program, in which it analyzes each category and SKU and determines the best assortment to carry, according to Rosenblum and Hertel.
“They are looking at whether the category is growing in real terms, and, if Wal-Mart invests time and effort to build that category within its stores, whether it will it make an impact on the bottom line,” said Hertel.
As Wal-Mart’s category-analyzing program progresses, it is not just certain SKUs that will be affected, “but entire brands or entire product portfolios,” added Hertel.
However, fresh seafood should be relatively safe from SKU cuts, because Wal-Mart is focusing on carrying fresh items, according to Hertel.
“Depending on growth trends, canned may be at some risk of losing brands to private label, or just to a reduced set, in my opinion,” he said.
