It is a universal phenomenon. During a slowdown and rising unemployment, the priority is to save money; consumers necessarily become budget conscious and typically prefer products that are comparatively cheaper but signify value akin to their higher-priced counterparts.
Conventional wisdom states that it is crucial for a retailer to deliver optimum choice, thereby driving higher sales and impulse purchases. However, in recent weeks, the world’s largest retailer Wal-Mart has been reported to be strategically re-aligning its product assortment by giving the customers a simplified choice to increase sales. In fact, the retailer is going as far as to limit choices in certain categories. Only time will tell if this strategy positively impacts Wal-Mart’s topline, but it is interesting enough to warrant an analysis.
Last week, on its weekly online poll, IndiaRetailing asked visitors if offering LESS choice can sometimes lead to more sales. Responding to this question, 84.71 per cent of the respondents registered their consent for limited offering on retail shelves leading to more sales, while 15.29 per cent of them refuted the idea.
IndiaRetailing also scouted for independent comments from retailers on whether too many choices on the shelves can sometimes confuse shoppers, or if an edited choice merchandise mix can help shoppers to focus and buy more. Most retailers seem to be fairly flexible about using either of the strategies as a means to boost the topline.
Arvind Singhal, director, marketing, McDonald’s India (West & South) believes that customers always look for more options at an affordable price. According to him the key is to get the best combination of options that satisfy a maximum number of customers. He bets on innovation in products and more varieties to be offered to the customers. “We cater to 12 to 13 million customers per month across India and every consumer has his or her set of choices. At McDonald’s, product innovation is an essential part of the business,” he says.
According to Singhal, McDonald’s keeps coming up with varieties in their offerings like the Chatpata McAloo Tikki, Shake Fries, etc. to cater to the best of customers’ choices. “Also, on a month-to-month basis, we offer ‘Happy Meals’ that are targeted at our younger audiences. We believe in giving everyday value to our customers by offering them more at affordable prices,” he states.
He believes that an updated communication should always be in line with the ongoing offerings at the product level. “Since the merchandise comes to play at the Point of Purchase, it is important that the former is interactive and informative and helps consumers in making choices. Thus, we use tray mats, translites, menu board huggers and shop-front posters to aid consumers in making the right choices,” he remarks.
“In a slowdown, it is better to keep the business model simple. If you restrict the inventory, you can contain your costs.”
— Sanjay Bindra, MD, Biba India
Samar Singh Sheikhawat, vice president, marketing at Spencer’s Retail Ltd. believes that the sometimes insatiable demands of shoppers cannot be fulfilled by lower choice in the store. “A long tail concept in any retail outlet makes more sales and this is certainly not applicable for budget-conscious shoppers. They would rather prefer to go for cheaper products like PLs but definitely not for fewer choices. I would say that the right merchandising mix draws more traffic and yields higher sales rather than stocking limited product assortments,” he opines.
But Sanjay Bindra, MD of womenswear brand Biba is of the opinion that offering less choice in stores helps in rotating the stock at a much faster rate. He ratifies, “In a slowdown, it is better to keep the business model simple. If you restrict the inventory, you can contain your costs.” According to Bindra, the strategy is practiced across all Biba outlets. “These days we are offering fewer options to our customers to drive consumption. We are offering only two colours instead of too many options in shades,” he informs.
“We are also reworking on sizing; instead of seven we have cut down to five sizes,” Bindra adds. As he clarifies, Biba is re-strategising its merchandise offering in order to focus on depth rather than width.
Viney Singh, MD, Max Hypermarkets India Pvt. Ltd. says that the Indian customer is already deprived of a decent product assortment. “At Spar we try and offer the widest choice and this is one of our key strengths. For value-conscious customers, we have strengthened our EDLP (Every Day Low Price) lines across product categories and typically account for 50 to 60 per cent of a customer’s monthly shopping basket,” he reveals.
To sum up, on what entices shoppers the most and influences their buying decisions, Singh says, “The customer philosophy at Spar centers on its four pillars of value, choice, freshness and service and shoppers are influenced by the promise that our brand delivers.”
“Nevertheless, shoppers do not mind flirting with choices depending on the potency of the offers a brand or an outlet offers at a given point of time. Customers visit McDonald’s as they find quality products at an affordable price, served in a clean environment,” Singhal concludes.
So, the answer depends largely on the product category in which the retailer deals and his understanding of the customer mindset. The key probably lies in offering a wide variety of “meaningful” and “appropriate” choices, which might draw more customers and induce them to buy more, rather than bombarding customers with a large number of uninteresting options, which might have the potential to confuse them and impact sales.