09Sep2009

Gorilla Warfare

IS IT JUST me, or is SKU rationalization becoming irrational at some retailers? Okay, so a few folk discovered they were selling only one package of frozen mastodon meat per decade, and a few others found that stocking 6,004 SKUs of yogurt was not particularly smart.

Sound the alarm! As Pogo famously said, “We have met the enemy, and he is us.” So now we’re seeing profitable, differentiating SKUs and brands being slashed and burned as if they were kudzu vines. There hasn’t been this much mayhem since Sherman burned Atlanta. This being the food industry and all, I’d expected some over-reaction, but lately things are getting out of hand.

To a limited degree, I blame Wal- Mart (Or is it Walmart?) Anyway, Wal*Mart was the only retailer paying close attention during the efficient consumer response movement in the last century, and in doing so it built itself into the 800-pound gorilla we all so enjoy today. Being an 800-pound gorilla gives it special privileges. As any military veteran will tell you, RHIP — “rank hath its privileges.”

Among those privileges, now that it has positioned itself as the Darth Vader of The Permanent Price Cut, is the ability to focus on fewer SKUs to build even more velocity and efficiency. Now, if you’re silly, you can copy Walmart’s strategy, which would be about as intelligent as copying Wal-Mart on price.

Gimme a break. My plea to these retailers would be simple: Pay attention to your DNA and what got you where you are today. If you’re Hannah Montana, don’t get into a slugfest with the heavyweight champ. Try something different.

You’d think this would be obvious, but it seems to me that while many retailers have gotten sharper with trained marketers in recent years, others have gotten burdened by too many MBAs with school smarts versus street smarts. We’re seeing too many decisions being made with differential equations instead of differentiation. You could follow some of those equations to their “logical” conclusion and stock nothing but private label milk and private label bread. Just think of the velocity and efficiency we’d have then! Sad to say, I’ve seen some good brands getting slashed for reasons that are just plain wrong, especially when “buying local” is supposedly a trend. The pendulum will swing back. I await.

This Strategy Works
One strategy that’s always worked well over the years: being the consumer advocate. Educate your shoppers — fill their needs instead of trying to “sell them.” Treat them like family. I saw lots of evidence of that when I was at Harris Teeter last month, just as I’ve seen at other strong retailers such as Wegmans over the years. Putting the customer first never goes out of style.