I smell a (SKU) rat

Rob Eder

“I have read dribs and drabs of this in different publications over the last couple of years, but this (“7 Deadly Sins of SKU Rationalization,” Drug Store News, June 7, 2010) really pulled it all together.… Hopefully some of the retailers will wake up and read this and understand what they’re doing in terms of customer loyalty, traffic, profitability and so on.”

That’s an excerpt of a voicemail I received from a former top executive of a chain that Drug Store News covers. As I am certain this veteran retailer would prefer to remain anonymous, we will not identify him/her for the purpose of this discussion. Really, it’s not important who said it; we have been getting an awful lot of comments like that in the wake of our June 7 cover story.

And so far, no one’s told us we’re crazy.

News stories continue to surface that lend further credence to the idea that retailers may have cut too much, too fast, and that the pendulum already may have begun to swing back in the other direction. Walgreens president and CEO Greg Wasson noted in the company’s most recent earnings call that the chain had “added back several hundred products” in fine-tuning its Customer Centric Retailing initiatives.

Meanwhile, The Nielsen Co. released a report that showed that as many as half of all consumers said they may shop somewhere else if they notice a retailer has “SKU rationalized” their favorite product out of the store.

And you can easily make the case that SKU rationalization played at least some role in the recent changes at Walmart, which on June 29 announced that Bill Simon had been named president and CEO of Walmart U.S., assuming vice chairman Eduardo Castro-Wright’s responsibilities for the $258 billion division. “[Bill Simon] is a talented strategist who will focus on growing our U.S. business by increasing customer traffic, upholding our price leadership and making sure that we have the right products in every store,” Walmart president and CEO Mike Duke wrote in a memo distributed to employees, which the company made available to the media.

“Clearly, Walmart didn’t make this change because it is overjoyed with the performance of its U.S. stores, where weak business trends have raised concerns about the effectiveness of that broad slate of merchandising, marketing and operations initiatives collectively referred to as Project Impact,” wrote Mike Troy—editor of Drug Store News’ sister publication RetailingToday.com —in the Drug Store News DrugFIX, a weekly e-newsletter that analyzes the industry’s top stories of the week.

Within a matter of days, chief merchant John Fleming announced he would be leaving Walmart.

What do you think about the SKU rat trap? Send your thoughts to reder@lf.com.

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