There has been wide business news coverage for the repeated assertion from Coles’ CEO, John Durkan, that Australian grocery prices are still too high, based on global comparisons.
No doubt that suppliers to Coles and other major supermarkets will hear, and feel, a lot more on this topic.
But the other key point that John Durkan made in the same recent discussion with analysts has not had as much spotlight. In many tangible ways, it is as important – and potentially, a contributor to the higher price impact.
That point is about the even longer running problem in our branded markets – the unprofitable impact of customer decision frustration brought about by overcrowding choice.
More critically, too many of these are marginal variations masquerading as consumer choice.
John Durkan identified two categories as examples of how range reduction on his shelves (to allow an increased focus on fresh produce) lead to significant increases in the sales of those items (pasta sauce and garbage bin bags).
Not surprising. Undisciplined line extensions and so-called “new varieties” have the opposite effect on growth expectations – and not just in cannibalised sales.
In a time-challenged shopping environment, too many cloned options bring decision postponement.
Return on shelf space suffers, and it pushes right back through the cost burdens on the supply chain. Double whammy – lower sales and higher costs.
Similarly, this applies to copycat “labels” (not brands) which bring the same product to market hoping that a different pack or a shaved price will earn them a viable market presence.
This concern is not confined to particular product categories (and not just in supermarkets); Australian marketers and their business leaders have had a love affair with the notion that more versions of the same is good for growth.
Consider the health insurance “options”. The most wanted solution for the buyer is less complication of choice and more simplification of the offer. Telcos play the game to win by complexity. Hold the phone.
Freeze frame the moment when the waiter hands you a twenty-page wine list. Impressive or off-putting? And the growth of sub variations of the same liquor, wine and craft beer in the exploding retail outlets. Watch the look of confusion and frustration on many of the trolley pushers.
We wrote on this topic from a wider view two years back (“Send off the Clones” – July 2015).
What was concerning was an acknowledgement of the problem, but a feedback of near impotence in trying to correct the addiction to range proliferation (sometimes under the mistaken guise of “ innovation).
Let us make just one point on that task. The most common approach to a company’s range rationalisation program is to ask the brand minders to decide what they can cut back. Good luck with that.
Experience points to the opposite management action. “Based on sales and profit performance – the following items in our range will be deleted effective from…. You have one week to make a business case for any one of these you believe we need to retain.”
That’s a fair choice. And a profitable one.
WRITTEN BY KEVIN LUSCOMBE AM
At SPP, we bring a high level of commercial pragmatism to the business of brand strategy and direct our radar to help clients win customer preference and create new growth.