Holding Ground: Why Efficient Assortment Should Be A Top 2024 Priority

By Simpactful Senior Partners, Bob Cinq-Mars, Heather Burgess, and Marcy Selva

It is only February. However, line reviews are around the corner and the pressure is on to create maximum resource and fiscal efficiency across both brand and retailer scorecards – while also creating joint plans that will create category and brand growth.

Enter Efficient Assortment. The process of determining the most productive and shopper-led assortment is both a powerful brand and retail tool that resurfaces annually in most businesses. It is used to reduce shopper complexity, drive operational efficiencies, and grow both profitability and volume – while also creating space for new innovation. We see demand for Efficient Assortment interventions peaking across many categories and retailers for several reasons:

• Retailers are trying to optimize cash flow to address poor performance issues, lure shoppers, enable mergers and acquisitions, or even free up cash to innovate or return to shareholders. For example: Walgreens is undergoing significant restructuring, Kroger is looking to realize efficiencies with the pending Albertsons merger, and Dollar Tree is piloting and expanding new formats. Meanwhile, Target is mixing lower-margin food and household essentials to drive trips and investing capital in next-day order-fulfillment capability, while Walmart is pursuing programs that help retail loyal shoppers.
• Over time, retailers and CPGs have proliferated assortment in many categories to drive more foot traffic and serve shoppers in new ways while expanding doors, exploring new business models, and building out operations to handle the Omnichannel. COVID-related supply disruptions to both branded and private label assortment exacerbated issues.
• Retailers have SKUs that are no longer productive. This impacts not only sales, but inventory costs, the ease of the shopper experience, and operational complexity.
• Meanwhile, brands have fragmented product lines and SKUs to meet channel and retailer differentiation needs. Counts, colors, product sizes, and pricing rapidly proliferated, making comparisons challenging to deliver on retailer value strategies.
• Many pursued reactive strategies to hold ground against new challenger brands eagerly attempting to snap up Brick & Mortar distribution and win over new retailer shoppers.
• Companies have evolved away from a consumer-first approach which has led to complexity in product portfolio for too little in return. As a result, shoppers are frustrated, and expectations are shattered as they are not getting what they want at the right price.

The results? Brands and retailers alike are struggling with end-to-end inefficiencies driven by the need to manage excess inventory. Costs are incurred along the spectrum from brand through to retail. These include a proliferation of artwork and creative needs, complex demand and production planning, Plan-O-Gram management, additional inventory carrying costs, complicated store resets, and splintered demand creation plans. Topline sales and margin growth can be materially impacted as incremental shelf complexity can alter shopper behavior and shopper satisfaction.

Most importantly, there are real opportunity costs to SKU complexity that can prevent brands and retailers from innovating. When dollars, people, and time are stretched thin to manage existing complexity, it is challenging to pursue new opportunities for top and bottom-line growth.

So what? Most buyers have been challenged to drive scorecard improvements quickly. Retailer buyers see Efficient Assortment as one of the most critical tools to turn around scorecards in 2024 and 2025. Many brands will lose facings following the review process – and once retailers make decisions, they are virtually impossible to unwind.

Simpactful is staffed with multi-functional brand practitioners as well as former retail executives who have managed through prior rounds of Efficient Assortment and are in touch with today’s business challenges. With our unique combination of experience on both sides of the desk, we can concurrently approach the challenge through the lens of retailer and channel needs as well as a manufacturer.

By assessing the situation from “both sides of the desk” with experienced practitioners, Simpactful can offer an objective view of the pace of change required, the strategy, and most importantly, how best to execute the strategy to prevent space loss and reduce risk. For instance, our joint multi-functional teams have helped clients at imminent high risk of distribution losses develop incremental demand creation plans at a retailer or cost incentive proposals. Our experts have also outlined joint distribution visions and plans to selectively reduce and redirect inventory and lead longer-term transformation projects to drive category growth. We assess the situation through a consumer architecture approach that looks at consumer insights, simplification, and design elements to help reduce cost. Here are a few of the ways Simpactful can help:

• Our Insight and Strategy experts can conduct landscape assessments to forecast shifting consumer and category dynamics to ensure portfolio changes will be sustainable. They are also able to lead research such as Line Optimization, TURF and pricing tests, and glean insights on likely shifts to behavior.
• Our Revenue Growth Management teams can evaluate channel, retailer, and brand SKU profitability to determine opportunities and recommend long-term assortment changes for the Omnichannel.
• Our Supply Chain, Demand Planning and Operations experts can identify cost-savings opportunities for brands and retailers, while also working on plans to manage down and redirect inventory levels.
• Our Retail and Commercial teams can help at-risk brands assess where they are realistically positioned within specific retailers and how to mitigate distribution loss. This includes an assessment of relative strengths and weaknesses vs peers, and the development of intervention plans to create wins for shoppers, retailers, and the brand.
• Our Innovation and Shopper Transformation teams can help to develop, validate, and execute a category growth vision.
• Our Commercial Planners can help you create effective sell-in stories for retailers and prepare for challenging negotiations.
• Our Consumer Insights experts can help you define what is most important to shoppers and their expectations that are relevant in today’s environment.

Done right, Efficient Assortment can deliver a win-win-win for retailers, shoppers, and brands that can pay long-term dividends. Helping retailers grow their ROI by reducing out-of-stocks on top-selling SKU, increasing sales by simplifying the shopping experience, and reducing operational inefficiencies can go a long way toward building retailer trust.

A challenge is a terrible thing to waste. If you need help assessing your risk of distribution loss or putting an Efficient Assortment strategy and plan in place, Simpactful can help! To learn more, contact our team today at contact@simpactful.com or 925-234-6384.

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