When you walk in a store, do you have a list? Or do you just wing it? Do you immediately grab your favorite brand or look for new options? What happens if the product you want isn’t on the shelf? For retailers, getting assortment right—the mix of products available—is crucial to move products from store shelves to our shopping baskets.
Often, the emphasis for assortment is speed—getting items on the shelf and moving them quickly. But it’s not just a question of what items are moving. Across all channels, total store assortment is expanding; however, sales aren’t keeping pace. While item availability has risen 3% in the U.S. food channel, 4% in the U.S. mass merchandise channel, and 2% in the U.S. drug store channel, sales have grown just 1%, 2% and 1%, respectively. These trends highlight how more options don’t always mean higher sales.
The key question to ask is: Are the right items on the shelf?
Shoppers don't spend much time thinking about brands when they’re at the shelf. A recent study found the average consumer spends just 13 seconds picking a brand in-store. Capturing people's attention is crucial, but knowing what your shoppers want is perhaps more important. Different consumers will shop channels and categories differently. “Different consumers” can mean many things: different demographics, different income levels, different tastes or different loyalties for whatever reason. Stores need to be aware of the consumer base they serve in order to tailor their offerings to their shoppers' wants.
On a national level, current practices within food stores are leading to saturation—meaning that adding more options could actually lead to fewer incremental sales for the store. A category with low incrementality can actually hurt sales in the remainder of the store by taking up valuable shelf space with added choices in that category. As a result, retailers need to manage food options differently to benefit the store as a whole.
For example, a Nielsen study showed that carbonated beverages are most likely to have an incremental effect on the overall business in the total U.S. food channel, but retailers disproportionately added “new age” and shelf-stable drink items to the beverages department from 2012 to 2013. The net effect is that the beverages department is being hurt. However, limiting assortment in the saturated shelf-stable drinks category and expanding options in the most incremental carbonated beverage category could help sales rise for the total U.S. food channel.
As we dig further into this and look at various consumer groups, that same study found that, at a very high level, various demographic and income groups generally shop similarly in the mass merchandise and drug store channels across the U.S. In the food channel, however, Hispanic stores differ from the total U.S. Products at food stores in markets with large Hispanic populations sell faster than the national average—even with a smaller assortment.
Hispanic shopper behavior also differs from the total U.S. population by category. And retailers should adjust their assortment to reflect this consumer base.
Similar to the total U.S., some categories are too saturated in Hispanic markets, and retailers' expansion efforts should focus on specific categories to drive demand.
In many cases, however, the incremental impact of adding one item for each category in a Hispanic market can differ from that in a non-Hispanic market. While adding one more item to shelf-stable drinks will hurt the category in non-Hispanic markets, it will benefit the category in Hispanic markets.
So where do opportunities lie in Hispanic markets?
Retailers should focus on developing categories with a positive incremental effect for Hispanic markets, such as shelf-stable drinks, while creating more defensive strategies in saturated categories like breakfast food and sports drinks. It will also be important for retailers to manage category changes so they don't over- or under-represent their consumers. For example, stores with strong Hispanic consumer bases continue to sell at or above the national average of African-American beauty products, which limits the development of Hispanic beauty products.