Too Much Selection – Why Less is Often More

A recent article from Business Insider caught my eye.  It was discussing how IHOP has bucked the trend of declining sales in the casual dining sector and how one of the ways it so was be reducing the size of and simplifying its menu.

Just like many restaurants, many retailers try to boost their sales by adding new items to their selection without retiring any older products – often for fear of not having someone’s favorite item in stock.

 

Apart from the implications that having excess inventory has on cash flow, space planning and inventory management, excess inventory can have a detrimental effect on sales.  For example, our team recently visited with a wireless retailer who carried no fewer than 25 cases for the iPhone.

A quick analysis revealed that the 5 top selling cases accounted for nearly 70% of the sales of iPhone cases.  At the urging of our retail consultants they reluctantly agreed to eliminate several of the slowest selling items.   The result was the elimination of 6 products from inventory, lower costs and  sales that didn’t skip a beat.

Why did this happen?  Here are some things to consider:

• Fewer choices made it easier to steer customers to select the items that the retailers really want them to buy
• Our team was able to create a simplified product training program to help the sales representatives to know their products perfectly
• The retailer was able to reallocate shelf space for other products that helped to build revenue and margin
• Time spent on managing inventory was reduced as they were tracking fewer skus
• They were able to secure better terms from their supplier based on volume

 

 

 

So take a lesson from successful restaurateurs….Sometimes deciding what to remove from your menu is just as important as deciding what to add.