Streamlining product selections could spell trouble for CPG retailers
LAS VEGAS Consumers likely will take their business elsewhere if they notice a reduced product selection at a store, according to new research released by Nielsen.
The new insights, announced at Nielsen’s Consumer 360 Conference on Tuesday, were pulled from a survey of 50 retailers across consumer packaged good channels and consumers in more than 21,000 households that conducted nearly 55,000 shopping trips. The survey also addressed that as retailers will downsize their product assortments — 42% of them scaled back in mid-2009 — if shoppers do not find what the item they want, the likelihood they will take their business elsewhere could be extremely costly for retailers. Nielsen cited that 7% of personal care shoppers will not purchase any item at a store if they cannot find the product they initially sought to purchase. According to Nielsen, a loss of just one-half percent in “closure” can lead to a loss of $1.5 billion in sales.
“Reduced assortments are definitely here to stay, and the message to retailers is to choose carefully when it comes to deciding which products to trim,” said Stuart Taylor, VP custom analytics for The Nielsen Co. “In many cases, strategically reducing assortment can result in an improved customer experience and greater profitability. Cut the wrong product, however, and the potential customer backlash could be costly.”
According to Nielsen, 75% of retailers are downsizing their product assortment to improve merchandising opportunities, while 71% cite a desire for greater control over inventory. Sixty percent state the moves are made to alleviate shopper confusion, while 52% are reducing selection to cut costs and improve profitability. Nearly half (48%) of retailers are making more room for store-brand products.
“Success in today’s competitive retail market is no longer about having the most products — it’s about finding the right mix of products,” said Taylor. “Retailers should be focused on offering the products their customers want most and making it as easy as possible for their customers to find and purchase those products.”
Stock repurchase program at CVS Caremark approved
WOONSOCKET, R.I. CVS Caremark has announced that its board of directors has approved a new share repurchase program for up to $2 billion of its outstanding common stock.
The share repurchase authorization expires at the end of 2011 and permits the company to effect the repurchases from time to time through a combination of open market repurchases, privately negotiated transactions, accelerated share repurchase transactions and/or other derivative transactions.
The company also stated that during second quarter 2010 it repurchased approximately 16.7 million shares of common stock for approximately $613 million, completing the $2 billion repurchase program authorized in November 2009.
Dave Denton, EVP and CFO of CVS Caremark, stated, “We’re very pleased with the board’s approval of this new share repurchase program and believe it reflects well-placed confidence in the future growth of CVS Caremark’s business and an ongoing commitment to increase shareholder value. We’re very focused on the efficient allocation of capital and we will continue to invest in internal projects that meet our return hurdles and use the rest of our remaining free cash flow to increase shareholder value.”
Denton continued, “Over the next five years, we expect to generate significantly more free cash flow than what we’ve generated in the past five years, and we expect to use the majority of that free cash flow in the near-term to enhance shareholder returns through dividends and share repurchases. We intend to continue to review our dividend annually and do share repurchases that are value enhancing.”
Bartell launches contest in line with anniversary celebration
SEATTLE As it gears up to celebrate its 120th anniversary this year, Bartell Drugs is launching a “Magical History Tour” contest at its stores, the regional retail pharmacy chain said Monday.
Bartell, the oldest operating retail pharmacy chain in the country, is collaborating with HistoryLink.org and The Seattle Times’ “Newspapers in Education” program. The contest will focus on facts about the history of the Puget Sound area, the section of Washington state that includes the area around Seattle and King, Snohomish and Pierce counties.
Through Aug. 23, a new clue will be released each Monday at HistoryLink.org/Bart and in the Monday edition of The Seattle Times. “Bart,” Bartell’s historic delivery truck character, will provide clues to historical sites in the Puget Sound area where answers can be found. Contestants submitting weekly answers will be entered into drawings for prizes, which will include a family pass to Seattle’s Woodland Park Zoo.
“This fun activity is both an opportunity to learn something about our area and a way of getting the family out and about this summer in an enjoyable way,” Bartell chairman and CEO George Bartell said.