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Retailers need to introduce new products to provide their shoppers with “good news” and to generate interest. But for each new product that you introduce you need to consider delisting an existing line.
Easy, you might think. “I will just print out the list of products in the category and take off the one with the lowest sales.” However, if you do this, research from the US suggests you might be wrong.
What you need to consider is what sort of demand you have for each product, a white paper by Demand Tec, a US specialist software provider shows.
It says that there are two kinds of sales:
Incremental sales, when products add to the total shopper spend and are not readily substituted by another item
Transferable sales, where shoppers find an alternative easily when it is not available.
Using its software, it shows a category with 50 products from top seller to bottom seller. At the same time it also measures the incremental sales each product provides. The number 50 in overall sales terms is ranked at number 13 in terms of incremental sales value.
Think about it this way – there are 37 other products that should be delisted before your number 50 seller if you wish to optimise your overall sales. These 37 include your eighth best selling product. Why? Because shoppers are more likely to pick up an alternative to product eight than for product 50. Which means they simply do not spend the money in your shop.
The first product on its way out should be product 32, says the analysis.
Corner shop operators lacking the software wherewithal to accurately analyse their categories can still use the thinking. For every product that you plan to delist, ask yourself what the shopper would buy instead.
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