Tesco is cutting one-third of its products from supermarket shelves in an effort to plug a £6.37 billion ($US9.51 billion) financial hole, the biggest loss in the company’s nearly 100 years of trading.
The slimmer range of options aligns more closely with the selling strategy of discount chains like Aldi and Lidl, which keep prices low by offering fewer items than traditional supermarkets.
When customers have a limited choice of stocked items, it increases the guarantee that those products will get sold. Larger sales volume helps to drive discounts, and in turn, attracts customers.
German discounter Aldi, which was recently named the world’s best grocery chain, has famously staked its brand on offering fewer labels with the goal of passing savings onto customers. Aldi offers just 1,400 items, while the typical store has 40,000. At the same time, the supermarket has managed to pull in over half a million new customers this year and saw a 16.8% sales increase in the latest period, helping it to overtake Waitrose to become the sixth-biggest supermarket in the UK.
As long groceries are cheap, shoppers don’t seem to mind less variety. Steve Dresser of the retail consultancy Grocery Insight points out that fewer choices makes for a more efficient shopping experience.
“A customer likes to look at one tomato ketchup and know it’s of sufficient quality, a good price, and then purchase it,” Dresser told the Guardian. “This is where the discounters have gained traction and, crucially in food retail, momentum.”
Tesco currently has 90,000 different products (including 28 different ketchups, compared to Aldi’s one), but Lewis is looking to push that number down to around 60,000.
“We will be taking ranges out of the business — ranges that aren’t selling because customers don’t want them,” Lewis told the Times.
By cutting out unpopular food items, more space can be devoted to products that are a sure sell, the publication notes. Kingsmill bread and budget milk brand Creamfields will be among the products that get booted, according to the Times.
Lewis admitted that businesses will be affected by the purge. “You don’t shed 30% of your range without having some impact on suppliers,” he told the Times.