February 14, 2019
It’s New…It’s Hot…But What If It’s Not?
New Product Management
There was not a day I was a category manager that went by when I did not get a call from one of our suppliers telling me about the hot new product that they were about to launch. As a matter of fact, since the year 2000 consumer product marketing companies introduced over 30,000 new products and line extensions. Big numbers of new products continue to hit the stores every year. Average supermarkets now carry over 40,000 SKU’s and convenience stores almost 3,300.
In many cases in convenience stores if suppliers have share of space agreements in place with the retailer, for the vault, or in line, suppliers just add their products to the mix automatically. I am sure this may have happened to you once or twice. The way you usually find out is because the UPC is not in the system and it pops up as an exception (assuming you have scanning). Not good!
Fortunately, or unfortunately, new products will continue to be a way of life. A recent survey indicated that the average c-store retailer gets presented about 450 new products per year. Some reported looking at up to several thousand new items.
Why are there all these new items? Companies need to be aggressive in developing and launching them to remain competitive. Customers’ needs and wants are constantly changing, fads come and go, new technologies emerge, making old ones obsolete, product lifecycles are becoming shorter and markets are becoming more and more fragmented. So what does this mean for convenience store companies?
With far less space available than supermarkets, much less than hypermarkets or buying club warehouses, managing space at retail is and will continue to be the lifeblood of the c-store business. Every linear yard, every square foot and even every inch matters.
I subscribe to the customer-centric theory of marketing. I am far more interested in whether it is an item my customer would want than I am in the money the vendor is willing to give me for carrying the item.
However, in order to operate this way day by day, at some point in time you have had to conduct an in-depth analysis of your customer base and have a good understanding of your competitors. You need to understand your customers – how they buy, what they buy, when they buy, how they prefer to pay and how your store fits into their current lifestyles. Not everyone cares about low carbs, dark chocolate, energy drinks, flavored waters or fat free chips!
When given the opportunity to add new products, the first question that I informally ask myself is “what opportunities does this product offer to increase business with my current customers, attract my competitors’ customers and/or expand my sales by bringing in potential new customers”? If the answer to all three is no or none, I simply don’t add the product unless it’s a line extension worthy of review or a new and improved product that is replacing an existing SKU. However, if I get a yes to any one part of my three part question, the next step is to do the economics and assess the risk versus the reward.
The next thing I then look at is the product’s potential life-cycle within my stores. Very few, if any, products in c-stores fall into a one-time purchase product life-cycle category. Although, there are fad items and seasonal products that do, which I usually add. I typically avoid items that are purchased infrequently unless they are part of my positioning strategy. This leaves frequently purchased products with high repeat purchase rates. If the new product fits into this category I add it and monitor its impact on sales and related sales. I don’t consider this testing. I feel it falls into the category of ongoing product maintenance.
If after doing your homework you find you have added an item that doesn’t sell, don’t hesitate to eliminate it. Don’t let your ego or the small investment you have in inventory prevent you from getting rid of a dead item. Space is far too precious to let it be occupied by slow movers.