Business Tip 24
Delisting Products at Shelf

The Basics
Listings and Delistings are the processes by which new products get to market and
non-performing SKUs are removed. It is critical to have both a clear and effective listing/delisting policy and a plan to keep these two processes working hand-in-hand for a fresh and profitable product mix. In this Tip, we will focus on the aspect of delisting products at shelf.

The decision to delist a product can be driven by a number of factors:

1. New item introduction
2. Package/size change
3. Product reformulation
4. Total store reset
5. Product failure
6. Seasonal items
7. 'In and Out' items

Any effective product discontinuation process involves a number of key elements, including several types of data analysis: sales, market, consumer, variety and profit. This analysis is critical to supporting delisting-related decisions. With a tool such as XP3, the process of analyzing product performance becomes a relatively easy task. XP3 transforms what used to be a time consuming process of manual analysis into an automatic process that maintains connections to sources for data changes and provides results on-the-fly.

In Action
Efficient assortment is a key principle that drives profitability and growth for both manufacturers and their retail partners. The analysis below (Chart A) illustrates the need for optimizing assortment at retail. In this example, the marketplace is attaining 70% of its sales with a significantly smaller number of SKUs. You can think of the gap between the two lines as the opportunity to 'tune' the retailer's assortment in this category.

Chart A

Analyses like the one above can, and should, be automated via tools like XP3 to create a quick and easy indicator of the current assortment situation. However, it is important to note that there are many valid reasons to carry an assortment that varies from the market as a whole. Remember that people shop your store because it offers something other stores don't - sometimes that differentiator is the variety of the items you carry.

Chart B

Choosing Products to Delist
So, once you've decided if delisting products is the right thing to do, you need to determine which are the right products to pull. Although there are many considerations (as illustrated in Chart B) to choosing candidates to delist, using a tool like XP3 can make the process easier. The example below is a simple table that takes some of the guesswork out of eliminating poor performers.

Table C

This analysis aims to eliminate some of the items that make up the tail end of the chart in Table C. In this case, XP3 has been used to dynamically filter the SKUs in the category to include only items that make up the last 5% of the category in terms of share. Creating some simple business logic that compares distribution to sales change in the resulting table allows you to easily identify which items are truly poor performers versus new items, or items that are already on their way out. In fact, it is not uncommon to apply additional filtering to this list to ignore items with extremely small distribution, as they have typically already been delisted across the chain.

The data, products and accounts depicted in this example are fictitious. Any resemblance to actual data, products or accounts is purely coincidental.