Kroger SKU Rationalization Push Going Strong
May 21 2009
Retail Wrap >>

U.S. retailer, Kroger appears to be in the middle of an aggressive SKU rationalization program, significantly reducing the number of offerings store-wide. Vendors say the company is putting more focus on minimum packout requirements, with an eye to driving efficiency at the shelf.

"We heard they just did the breakfast category, and some companies got hugely whacked," says one vendor. He said he'd heard the SKU rationalization effort has been driven in part by research by London-based dunnhumby showing that consumers prefer shopping at Walmart more than at Kroger. Reportedly, if fewer SKUs are producing customer satisfaction and also improved sales and profits at Walmart, then that's where Kroger wants to go. More facings for fewer items also give you the obvious benefits of lower labor costs and fewer out of stocks.

Dunnhumby - a specialist in data management, customer analysis and insight-led planning - mines data from Kroger's loyalty cards (40 percent of all U.S. households held a Kroger shopping card in 2006) and works with Kroger to unlock customer insights that provide guidance for product selection, merchandising and promotion. In this context, it could certainly be expected to offer detailed advice on SKU rationalization.

Don Becker, exec vp and head of merchandising at Kroger, noted that in the breakfast cereal category they eliminated nearly 30 percent of all the SKUs. "We did it with our data," Mr. Becker said. "The customers were telling us with their wallets what they were buying. And so we eliminated some sizes. We eliminated some different SKUs and even some variety - keeping in mind localization, what was really important to that store or to that area.

"And we stayed in stock better and our customers only asked us to put one item back in because they were really concerned," he continued. "They only missed one item enough that we needed to put it back in. So, SKU rationalization, we know we're heavy, we know it's a real opportunity and we also know that we can't do it just looking for a certain percentage that we need to take out of every category."

Adapted from source: www.retailwire.com, 5 May 2009