SKU Expansion: Too Much of a Good Thing?

Originally printed in the May 2022 issue of Produce Business.

The expansion of variety has dominated the retail produce industry over the past 40 years. Beginning with the Produce Renaissance in the ’80s and ’90s, U.S. retailers continually expanded the produce items available in their stores. It was the general consensus that this was a good thing and there was no ceiling to the amount of variety one could display in the produce department. Perhaps it is time to cast a critical eye on this concept and determine if it is still viable.

Upper management has always welcomed the expansion and growth of the number of SKUs on display and have relied on their notorious use of slotting fees to profit from the expansion. It is common practice to maintain multiple lines of identical products throughout the store and collect slotting fees for each line. There seems to be no end to this strategy by upper management and in most cases, it is encouraged and seems to be the status quo. Because of the reluctance of upper management to review the validity of this process, it shows once again, “they just don’t get it!”

To evaluate such a sacred concept, one must be cautious and respectful of the success it has generated over the years. In produce, the expansion of variety has led to the abundant display of every available variety of fresh produce to be the norm at retail across the nation. This expansion has allowed many retailers to expand the size of their produce departments and entice consumers with massive displays of abundance and selection. However, it seems reasonable there must be a point where the expansion of variety begins to border upon a strategy of repetition.

The questions need to be asked: “How many nearly identical apple varieties on display are too many?” “How many varieties of mixed salads are necessary?”

As one looks at produce departments today, a descriptive word creeps into the conversation, and that word is “clutter.” The original concept of variety was to offer the consumer many possible ways to make a purchase of fresh produce within the department. Different sizes and packages were added to reach this goal. Now, it seems that produce departments are a collection of “extended lines” of similar or identical products that tend to provide TOO many options and potentially confuse the consumer.

The questions need to be asked: “How many similar, nearly identical apple varieties on display are too many?”, “How many varieties of mixed salads are necessary?”, “How many identical lines of salad dressings are needed?”, and “How many different mixes of cut fruits and melons/vegetables must be developed?”

These questions need to be asked to determine the proper mix and selection of items that should be available in the produce department. Beyond these obvious areas, we need to examine others, such as the number of packs of items needed to offer optimum sales potential; proper space allocation of higher volume, more traditional items as well as less popular items; and what is the proper mix of all these categories and items to maximize consumer interest and sales potential.

An evaluation of the produce department is absolutely necessary to ensure the continued growth of this department by providing the adequate space to maximize the sales and profit potential for each item and category. Given the pressure from suppliers to take on new items, this evaluation will be challenging to complete and difficult to provide justification for the changes to this time-honored concept.

To challenge and change the culture of constantly expanding variety requires diligent examination of the data and facts pertaining to each item and category. It will also require tough decisions on how much space to allocate, as well as the number of items included in the category that will fit into the allocated space. Despite the difficulty, this must be done, as we all recognize the space available for the produce department is finite. Most retailers are not building bigger stores, therefore, it is highly unlikely that additional space will be allocated in new store designs to fresh produce or any other department. It becomes absolutely vital that we determine the best possible items and categories that we include in the schematics for our departments.

The innovative produce retailer will be on the cutting edge of this re-evaluation of offerings to ensure it is incorporating the benefits of a wide variety of fresh produce available and maximizing the sales and profit return for the space allocated. The alternative would be to allow the continued out-of-control expansion of variety and categories in the department so that it will become a disorganized, cluttered conglomeration of products with no clear direction.

Determine for yourself which concept will meet consumers’ needs and provide the necessary opportunity for continued growth and success.

Don Harris is a 41-year veteran of the produce industry, with most of that time spent in retail. He worked in every aspect of the industry, from “field-to-fork” in both the conventional and organic arenas. Harris is presently consulting. Comments can be directed to [email protected].