Range Management

Range Reviews

In most Western retailers, there is usually at least an annual evaluation of what parts of the range the retailer should maintain, cut and grow. It helps to be clear at the outset about how you want the RR results to be. From then onwards, you work on selling these ideas again and again to the buyers the whole year till the range review has happened.

In the past, manufacturers could support their category rationale with commercial incentives to win range reviews (which is the case in some developing markets still) but in more and more markets, regulations are prohibiting manufacturers to pay for distribution & primary space. This means manufacturers are purely relying on finding category rationale and selling it to the retailers. For example, how listing your product, or giving it more distribution or taking out a competitor product will grow the value of the total category for the retailer. Either what you are proposing should help the category grow or it should help your brand grow which would drive category growth.

What Objectives Do Retailers Chase?

Besides maximizing Sales and Profitability, which are the overarching objectives for pretty much anything they do, retailers conduct Range Reviews focussed on some or all of the below objectives:

• Minimizing Disruption in shoppers’ purchase journey instore

• Guide shoppers to make better decisions (in terms of value, right products etc)

• Making it easy to find products they are looking for

• Facilitate shoppers’ decision making process

• Enhance the shopping experience

• Align with existing trends

• Create new trends

• Meet CSR objectives, (sustainable products, DEI, charity etc)

• Experiment with new solutions

• Keep widening cover age of needstates

• Reduce stockouts

• Make operations instore more efficient

• Drive compliance of plans and communication

Paradox of Choice

This is an important concept at the heart of ranging decisions. Popularized by psychologist Barry Schwartz, this phenomenon in the context of retailing says that the more options a shopper has, the less satisfied and more paralyzed they become when making the purchase decision. As such, there is a drive in developed markets to rationalize the range at all times to try and make the purchase decision as simple as possible for the shopper. This is expected to reduce “walk-away rate” from the shelf, cull the “dwell time at the fixture” and lead to more “conversions”.

Discounter Model

Moreover, having a simple range enables retailers to save on supply chain costs and reduce complexity in their overall business which allows them to manage it more efficiently. This has amply been leveraged by discounter retailers in various countries. Some European discounters have been able to disrupt entire trade landscape with a winning formula of simple ranges and low EDLP prices. There’s a term of minimum credible range commonly used which sometimes refers to just having the one SKU of market leader and one SKU of own label in each need state.

Ecommerce

With respect to range management for online, some of the same principles as bricks and mortar apply. Distribution or availability of products online is critical but a lot of retailers don’t offer all products to shoppers in all geographic areas due constraints on fulfilment centers. In other words, often retailers are constrained by warehousing, fulfilment and delivery so they don’t offer low ROS products. For Grocery Multiples or multichannel retailers, low distribution SKUs are excluded from online range because order fulfilment is being done from only the larger stores/warehouses atleast as of this point in time. This amplifies your bricks and mortar market share strength or weakness since the stronger the brand, the more SKUs it has in high distribution and the larger will be the brand range online and vice versa (the same applies to convenience; due to constrained space, it is a winner takes all channel). However, this is temporary due to the long tail phenomenon. As online % of total business grows retailers will discover that they are actually missing out on a significant chunk of niche business and they will start adapting.

How Do Retailers Conduct Range Reviews?

Retailers typically follow a structured process for conducting Range Reviews:

1. Data Collection & Analysis

2. Supplier Engagement (take proposals, negotiate etc)

3. Ranging Decision Making (delists, 1in1outs, NPDs, OL vs brand..)

4. Category Plan Development (fixturization, signages, activations, shopper education etc)

5. Implementation & Monitoring (rollout, post implementation reviews, corrective actions)

Whats the 1% that drives 50% of the results?

We are all familiar with Pareto’s Principle. Applied to Key Account Management, it means, in one context, that 20% of the activities you engage in as an account manager gives you 80% of your results. What people don’t realize however is that Preto’s principle even applies to this 20%. So 20% of this 20% (which is 4%) give us 80% of the 80% i.e 64%. Applied again and again brings us to the 1% rule i.e 1% of activities drive 50% of your results.

In Key Account Management, this 1% is Range Management.