More isn’t More. What you can learn from Costco and Trader Joe’s.
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 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 warehouse stocks only about 3700 SKU’s in a 144,000 square foot store. 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 4200 SKU’s! Visitors were so confused 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. An addition of a line here, 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, says too many choices can lead to decision-making paralysis, anxiety, and stress. By proudly offering a smartly curated collection of items that target your ideal customer avatar, Schwartz say you are 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 probably a sign that either don’t know your customer as well as you should or don’t have confidence in your ability to purchase on their behalf.
But 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.
Pull POS reports of your top 20% sellers
Analyze them for 3-6 months. What do these items have in common
Were they in the same price range?
Were the majority sold to your best customers?
Regular customers?
Were they all displayed in the same area or the same way?
Are the similar in nature or pricing?
Were they mostly sold by the same person?
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!
Now take a look at your bottom sellers
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 1800 SKU’s had sold more than one in 6 months. That means more than half his stock never moved! His overbuying was killing his business.
Ask people what they want
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 to the point
Search for the unicorn
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 tribe.
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!
Until next time remember….
You can do this!
Angel
Read more about Costco and Trader Joe’s.
https://www.businessinsider.com/trader-joes-how-gets-you-spend-money-psychologist-2019-1
https://thehustle.co/costco-membership-economics/amp/
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