Small Business Center
By Angel Cicerone, Tenant Mentorship
I’ve been obsessed with reading about Trader Joe’s and Costco lately. We can learn a lot from these stellar companies, especially the way they so thoughtfully manage their product selection. The key to their success — and it’s not rocket science — is that they offer what customers want to buy or, at the very least, what customers think they want to buy. No one really needs a 25-pound tub of peanuts, right?
The average Costco stocks only about 3,700 SKUs in 144,000 square feet. Just to give you an example of an extreme more-is-more mentality, I worked with a 3,000-square-foot toy store that stocked 4,200 SKUs! Visitors were so confused that they just turned around and walked out. Most examples of more is more aren’t this extreme, but I see it all the time with my clients. Add a line here and a few new menu items there, and none of it pays off in the end! The reason? People don’t want more choices. They just want what they want!
Barry Schwartz, author of the Paradox of Choice, said too many choices can lead to decisionmaking paralysis, anxiety and stress. By proudly offering a smartly curated collection of items that targets your ideal customer avatar, Schwartz said, you’re claiming, “You can’t have everything, but everything we’ve got is worth having.”
Are you guilty of the more-is-more mentality? If so, it’s probably a sign you don’t know your customer as well as you should or you don’t have confidence in your ability to purchase on their behalf. With a little research and a bit of confidence, you can get past this, and you really should. After all, your ability to purchase properly for your customer is the key to improved sales!
Here are a few tips to get started.
Analyze them for three to six months. What do these items have in common?
You get the idea. Do a forensic deep dive into what’s selling to whom when and why. Yes, it takes a little effort but this is your business!
Can you find commonality in the items that always end up on the sale rack or rarely move?
Put those bottom sellers on sale or take them off your menu! You don’t need them. They’re messing with cash flow and making your business less exciting. Going back to the toy store example, a sale-by-item report revealed only 1,800 SKUs had sold more than one item in six months. That means more than half of the store’s stock never moved! His overbuying was killing his business.
I love the idea of doing short, in person surveys with customers and visitors. Just a few questions will get you a lot of information. Find out what types of items they like, the price points, how often they buy, how they use your products. Retail stores and restaurants are mini research labs. Every person that walks in can give you valuable feedback that will help you fine-tune your selection.
Once you’ve done the research and are more intimately connected with your customer avatar, look for one or two items that scream, “I know you, and I know what you want.” In today’s retail environment, you have to find ways to distinguish yourself, and the way to do that that is finding a few things that are exclusive to you and resonate beautifully with your community. Take the time to go through the process. And don’t be afraid to offer less, especially when less can translate to improved sales and more loyal and emotionally connected customers. The last thing anybody needs is more stuff. They can go to Amazon for that!