SKU Rationalization Hitting Outdoor Specialty Channel

Here's an article passed on from the Outdoor Industry Association News by Gregg Gunderman at AquaBound-Bending Branches. The point -- in today's economy, pick what works, commit to it, go narrow & deep with your sku selection, and by all means do NOT confuse the customer with too many choices. All good advice. Thanks Gregg for passing this along.

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SKU Rationalization Hitting Outdoor Specialty Channel

After years of assaulting shoppers with a growing array of SKUs, retailers are reigning in their product offerings and outdoor specialty retailers are no exception.

In a recent conference call, Costco told security analysts it had reduced its average store SKU count by 150 to 200, although much of it came from tobacco. Target has consolidated multiple private label sub-brands in its home furnishings area into a single brand. “We are editing the assortment and reducing SKU count to allow for cleaner presentation and to more clearly communicate the strength of this brand to our guests,” the company told security analysts earlier this year. Dick’s Sporting Goods reported this spring that they were dialing in their model stock and letting tertiary brands and SKUs go.

The SKU rationalization is part of the broader shift away from new store openings and toward improving operations at existing stores. In some instances, this allows retailers to secure better shipping rates and other volume discounts from remaining vendors

“We’ve stepped back from opening stores and are focusing more on comprehensive financial management of existing stores,” said Frank Pitts, franchise development manager for Fleet Feet, which has franchised about 90 stores nationwide, including just one new store this year. “We suggest they are better off going narrow and deep. That is part of our financial management advice.“

San Diego-based regional chain Adventure 16 has reduced its SKU count by about 5 percent for the upcoming holiday season, said CEO John Mead. “There will be more accessories, but a tighter more focused gift selection and many less lifestyle shoes.”

In Minneapolis, Midwest Mountaineering has reduced SKUs in camping by reducing the number of brands offered for some items from four or five to two or three, said owner Rod Johnson. The retailer has left apparel relatively untouched and increased its footwear SKUs.

The biggest SKU cut has come in paddlesports, where Midwest Mountaineering has eliminated some pricier kevlar and fiberglass boats most impacted by the recession. “We still have 130 boat models, so the choice is still overwhelming,” said Johnson.

Like Target, Eastern Mountain Sports trimmed back SKUs for its EMS brand in a move that actually enhanced EMS brand penetration in top categories.

The trimming at retail and tight credit markets are prompting manufacturers to rightsize their own operations. Johnson Outdoors, for instance, has been working to reduce SKU counts across the company by 20 percent as part of an aggressive cost-cutting program.

At The Alpine Store in St. Louis, MO, co-owner Lisa Hollenbeck is now concerned she may have cut SKUs too deeply as part of a 20 percent reduction in inventory from the fourth quarter last year. The retailer pulled back on color selection in women’s rainwear and eliminated duplication in several categories, while adding to its selection of gift socks.

SKU rationalization may seem counterintuitive at a time when consumers can go online and find exactly what they want. But it may already be bearing fruit. In the last week, U.S. news wires have carried several stories warning consumers that they will find less to choose from on store shelves this holiday season. That could motivate consumers to shop early and prevent a repeat of last year’s panic discounting by retailers.

Regardless, many in retail wonder if consumers are suffering brand fatigue.

“If you are offering everything out there, you are probably doing a disservice to the consumer,” said Dan Mann, a retail consultant. “If you offer me the same product across five different brands, that’s just confusing.”

Mann said he is questioning the “good, better, best” model of retailing. Perhaps specialty retailers should concede the low end of the market to mass and focus on better and best.

“I'd like us to go deeper with some of things we are committed to,” he said of outdoor retailers. “Don't confuse the customer with 17 other choices.”

If you are offering everything out there, you are probably doing a disservice to the consumer,” said Dan Mann, a retail consultant. “If you offer me the same product across five different brands, that’s just confusing.”

Mann said he is questioning the “good, better, best” model of retailing. Perhaps specialty retailers should concede the low end of the market to mass and focus on better and best.

“I'd like us to go deeper with some of things we are committed to,” he said of outdoor retailers. “Don't confuse the customer with 17 other choices.”