Long before the pandemic, a trend was occurring in which retailers began selling more products online. Consumers were becoming more comfortable using the internet to shop for products, which could be found, purchased, and delivered easier than ever. These forces began the slow erosion of the power of brick and mortar shelf space.
The pandemic accelerated that trend as many consumers stayed in their homes and out of the stores. Online sales grew 36% in 2020, and reached nearly 20% of retail sales in total.
Online grocery sales were also up in 2020, but grocery stores stayed open through the worst of things. Many stores quickly adapted to delivery and curbside pickup to accommodate concerned shoppers, and consumers continued to shop in person as they stopped eating at restaurants and instead cooked from home. As a result, both grocery stores and CPG brands showed strong profits last year.
Today, retailers continue to struggle with labor shortages, finding themselves with less help, yet more to be done than ever. As more shoppers return, retailers must also maintain increased cleaning protocols and support new services like curbside delivery. Inventory has also been a problem as CPG manufacturers wrestle with supply chain issues and inability to deliver goods in a timely fashion.
All of this has continued to erode the power of the retail shelf. As stores proved they could do more with less, they are starting to take a look at what can be changed going forward.
The last 18 months have seen retailers respond to challenges by streamlining their inventory to focus on the most productive items, and in some cases, finding profitability with smaller footprints and less shelf space. CPG companies have also had to refocus their efforts, prioritizing the production of their most popular items over obscure ones.
Some retailers are finding valuable lessons from the experience. First, that a smaller selection is actually reducing consumer confusion, leading to increasing sales and lowered expenses.
The idea that less is more is not a new one. Numerous studies have shown that too many choices lead consumers to feel overwhelmed, and make them both less likely to purchase and more likely to be dissatisfied with their decision if they do.
Grocery analysts suggest that an inventory purge has been overdue, and that they anticipate many retailers will be reviewing suppliers and rationalizing product lines. In an interview with Food Dive, CEO of IGA stores, John Ross said, “It’s inevitable that there are going to be fewer aisles and the SKUs on those aisles are going to have to be more productive.”
Likely to be scrutinized first will be excessive sizes or configurations of the same product (single serve, mini pack, 3 pack, 12 pack, etc.). Retailers will also want to make space for products that are truly different, and not just incremental variations of a popular product.
In part, this will allow retailers to seek space for category disruption and truly innovative products. Instead of carrying five different sizes of Budweiser, they’d rather leave a little room on the shelf to introduce consumers to the next potential breakout product, like White Claw.
Smart CPG marketers will be prepared to embrace these changes. They will be ready with streamlined offerings of their best-performing products and focused on delivering genuine innovation with their new offerings.
The Brandon Agency has a team of CPG marketing experts to help companies navigate the chaos, find their place in the market, and connect their brand with customers who need it. For information, contact us.