In a world obsessed with giving consumers more choice than they need, retailers may feel that a tipping point is on the horizon, writes Julian Lea.
Any customer can have a car painted any colour that he wants so long as it is black." Of all the famous business quotes bandied about, these words said by Henry Ford in 1909 are among the most widely remembered. He was referring to the Model T, and the need to restrict variety as a trade-off to allow factories to produce more of them. He was one of the first businessmen to apply assembly-line manufacturing to the mass production of affordable cars.
But the statement wasn’t entirely true. As demand waned, it became possible for consumers to get the ModelT in a range of colours, including red and green. It is one of the earliest examples of product life-cycle management, where the conditions in which a product is marketed change over time and must be managed as it moves through different stages.
More than 100 years later, the battle between marketing and manufacturing teams rages on. Marketing gurus hate losing even a single sale to a competitor, so they have been known to offer a huge range of product options to suit every possible taste.
Innovate or die, they say.
Manufacturers see this as inefficient. Supply-and-demand planners think of it as madness. Bean counters struggle to reconcile the benefit with the cost. And retailers, under pressure from brand owners, are torn between happy customers and having an efficient store.
Recently, some of this "innovation" has spilled over to the food sector. There are now more than 10 different kinds of Hellmann’s mayonnaise. You are also able to buy over 20 different versions of Coca-Cola in other parts of the world, and as many as 200 flavours of Kit Kat are available in Japan. It is as bizarre as it sounds. Would you be interested in sampling Coke with a hint of garlic? Or sweet potato-flavoured Kit Kat?
When these varieties are multiplied by the number of different pack sizes, things quickly descend from sublime choice to utterly ridiculous diversity.
Further, a retail store has a finite size, creating problems for brands and outlets.
SA’s largest food retailer companies list over 80,000 different items of stock in an average supermarket. They are adding new stock at the pace of about 500 a month.
But the explosion of new products introduced to stores has reached such a level that supermarkets now also need to delete 500 stock items from their lists each month.
Somebody, somewhere, must have shed a tear when the 200g version of zero-fat, zero-everything gooseberry yoghurt was delisted to make way for the caramelised onion-flavoured Hellmann’s mayonnaise in a no-mess squeezy bottle.
With so many more items to display, grocers are forced to stock less of each item. And this invariably means that these stores will experience a higher frequency of stock depletion.
In response, retail groups have built huge distribution warehouses closer to stores and have centralised their supply planning operations. They are well aware that nothing is quite as effective for making shoppers rethink their brand loyalty as an "out of stock" sticker where they’d normally pick up a box of corn flakes.
For retailers, in a world gone mad with manufacturers trying to satisfy different subsegments of the consumer market with yet another "innovation", the tipping point — when customers get fed up with the consequences — can’t come soon enough.
Similar levels of stock proliferation are taking place in sectors such as apparel.
So when you notice the exasperated expression on a store manager’s face when she is asked why such a large supermarket has run out of 200ml Indian tonic water cans on a Friday afternoon, be helpful and suggest that it may have something to do with the new marula-flavoured sauvignon blanc.
• Lea works as a management consultant for US-based business advisers GLG