Fox: Industry to reject too many SKUs

Online retailers may encourage the explosion in SKUs for fast-moving consumer goods, but the bricks and mortar stores will push back against the trend, says Rick Fox.

The chairman of the Packaging Machinery Manufacturers Institute (PMMI) in the US, Canada and Mexico, speaking at the AIP National Packaging Conference, says real-world retail recognises that there is such a thing as too much choice, and bottom lines will prompt a shift in the industry.

A move away from the current short-run, multiple variety approach of brand owners could come as a relief to packaging converters, who are facing demanding cost pressures and tighter margins in the short-run, fast-turnaround space.

Fox says supermarkets are starting to limit the number of varieties they will display onshelf as a pushback against the frenzy of SKUs in a high pressure, target and diversify, fail-fast environment for brands.

While online stores are able to offer more variety, designed to appeal to individual shoppers, supermarkets do not want to stack 50 different lines of a product on their shelves and risk overloading the consumer with too many options.

Furthermore, Fox says not all SKUs introduced by brands in order to maintain market share make money, or even break even.

He says, “At some point someone is going to have to make a financial decision that all of the SKUs are just not worth it. Packaging converters are feeling it, supermarkets are feeling it, brands are waking up to it.

“There are too many choices. In some stores in the US they have gone down to six selections. So the pushback may be with the retailer.

“Amazon, however, and the other online sellers, are unlimited in the variation they can offer, provided they have the infrastructure and processes to handle it.”

But online providers may be hurting the high street stores in other ways. Shoppers, says Fox, are extremely sensitive to packaging, and even a slight difference in the package they have in their hand compared to an online version can put them off a purchase.

He says, “The sensitivity to changes of packaging at the consumer level is phenomenal. In the States everyone has a cell phone, and people will walk into the point of sale, pick up a product and scan the barcode. If the label that comes up on the internet is different to the one that they were looking at, they will not buy the product. That is the level of sensitivity.”

In this game, the story a brand is telling online must correlate with its onshelf presence, as consumers increasingly shop with their mobiles at the ready.

Fox says retail is seeing generational change driven by the so called Millennials, or Generation Y. He says 92 per cent of this group have no use for brands, and 46 per cent use smartphones to check with friends or other sources to see if a product is worth buying.

The next generation, born after the 2000 mark and tipped to value quality over brand loyalty, will have their own effect on the market, set to emerge in the next half-decade.

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