Many retailers have been losing more sleep than usual over the ongoing changes in consumer behavior, and how those changes affect business. As we slowly claw our way out of the worst recession in modern times, collectively we’re wondering what the world is going to look like once the economy does finally fully recover. Or—scarier still—maybe it has fully recovered and this is the “new normal."
What we know is that the vast majority of shoppers (72 percent, according to a recent PWC/Kantar Retail study) have significantly changed their behavior. Only 7 percent of shoppers have made no changes in how they shop. On top of that, the consumer is changing, with Baby Boomers taking a back seat to the Gen X cohort for the first time. Both groups are better informed than ever through easy access to information via the Internet.
Getting to the Internet is easier as well, with more and more people going online via a mobile device, which means, in many cases, shoppers are researching products in real-time, while standing at the shelf edge in the store. And thanks to a bevy of mobile apps, shoppers can find everything from product details to the best price in town in less time than it takes to walk out to the car and drive to your competitor.
The upshot of all these changes is this: the world has changed, and retailers need to change with it. In case there was any doubt before, let there be no mistaking the fact that the shopper is absolutely in charge. This means that in-store tactics that may have worked for years are no longer effective, assuming they ever were.
SKU rationalization is getting a lot of press lately, as retailers look for ways to cut inventory costs and reduce out-of-stocks. But retailers got themselves into this situation over many years, accepting up-front payment for products that often sat on the shelf. A recent Symphony IRI stat declares that 88 percent of center store items don’t sell one SKU per day. In a business based on razor-thin margins, that is not an acceptable turn rate. And a new Heinz/Kantar Retail white paper makes the case that every dollar brought in through slotting fees and other allowances goes back out in the form of increased inventory costs, not to mention the lost sales due to out-of-stocks for those items that do sell.