Finding the right balance to your product assortment

Finding the right balance to your product assortment

Understanding the assortment features in Pakistan's traditional trade heavy market

With the changing lifestyles, hectic and busy routines coupled with the wide range of choices offered to shoppers, it has become extremely critical for manufacturers to strategically manage product assortment for effectively selling their products. In this day and age, shoppers merely get to spend 20-25 seconds per shelf, giving manufacturers very limited time to convert this visibility to actual sales.

There is a general perception in marketers and shoppers alike that more choice offered to shoppers leads to higher chances of that brand’s off-take. But is this really true or simply a myth? Imagine entering a store and facing a shelf with 50 different kinds of bread? Sounds fancy? Or just overwhelmingly confusing to look for your regular plain loaf of bread?

In order to understand the critical dynamics revolving around product assortment, let’s consider the “Jam test” conducted by Stanford and Columbia University in 2000. In this study, shoppers were exposed to two table sets; one with six different jam flavors while the other one had a variety of 24 flavors along with their samples. The initial results were in line with the conventional perception since 60% of the passersby stopped at the table with more variety compared to 40% who stopped at the other table with lesser options. However, the purchasing patterns told an entirely different story highlighting that 30% of the limited choice passersby actually purchased the product vs. merely 3% of the other table testers.

This highlights that the “choice overload” not only extends the decision-making process before converting it into purchase outcome, but can also become overwhelming and discourage shoppers from actually buying the product.

This raises an important question: can marketers even afford to put infinite choices in today’s retail space? Since Pakistan is a traditional trade heavy market, an average general store has a shelf area of 216 sq. feet which can contain close to 30 categories within this space. This leaves only 7.2 sq. feet of space per category. A one liter UHT carton has a dimension of ~0.8 sq. feet, which means that it can stock maximum nine packs of one liter in this space. With the manufacturer’s sales representative visiting this store once a week, either he can stock a range of all four Sales Keeping Units (SKUs) (250ML, 500ML, 1Lt & 1.5Lt) and easily risk being out of stock in one of the most selling SKUs, or just stock 1-2 SKUs in this limited shelf space. This sums up one of the main concerns faced by a salesman in this field.

If we apply these insights to the handful of modern stores in Pakistan, where every inch of shelf space is available to players at a cost, we witness certain challenging decision-making dynamics. This is because in such scenarios, the need for the Return on Investment (ROI) is even higher. There are two ways to go about it. A player can either stock multiple kinds of SKUs in one shelf, or can have a cleaner and more appealing shelf space. Consider the example of a consumer visiting a modern trade store such as Hyperstar or Imtiaz for the start-of-the-month bulk purchasing.  On one hand, at a cooking oil shelf, the consumer faces a variety of 14 different SKU sizes and on the other hand, the consumer comes across another shelf with a very clean assortment of only 1Lt and 5Lt SKUs. In this regard, it’s interesting to see that despite the variety the first shelf offers, the SKU at the latter has a chance of being picked up 7 out of 10 times. With the 7/10 probability SKUs being stocked, the latter shelf presents the optimal ROI and the highest chances of consumers’ attraction (ignoring of course, any consumer preferences).

We can also look at multi-country data to see if there is any correlation between the number of SKUs and its market share and quite frankly, there is none. So more is not always the merrier but probably the new phrase in the assortment world could be the “the best things come in small packages”.