Variety may be the spice of life, but as shoppers rein in their spending, many retailers now find their overstuffed inventories just a bit too spicy. However, stores' efforts to whittle down their bloated roster of products could ultimately do more harm than good.
According to a Wall Street Journal article, retailers such as Wal-Mart Stores (NYSE: WMT), Kroger (NYSE: KR), and Walgreen (NYSE: WAG) are paring back their product selection to cut inventory costs. Many stores currently offer an absurd amount of choices; the Journal cited stores reducing super-glue options from 25 to 11, or offering four different tape measures instead of a whopping 24 varieties.
That abundance of often needless choice now seems like a relic of our former economic heyday. Starbucks (Nasdaq: SBUX) famously thrived on the loads of personalized options with which it adorned the once-simple cup of coffee. And for me, going to the grocery store can sometimes feel like a daunting information overload. Trying to figure out which variety of Procter & Gamble's (NYSE: PG) Crest toothpastes I really want makes me feel like I'm doing rocket science.
Still, shareholders in conventional retailers probably won't approve if stores cut too deep, for fear that too few choices could alienate consumers. Pruning too aggressively could also pinch suppliers, who may already fear that smaller inventories will shut them out of huge retailers like Wal-Mart.
Internet rivals pose yet another danger for stores slashing their selection. Online, the amazing amount of choice that Netflix (Nasdaq: NFLX) and Amazon.com (Nasdaq: AMZN) offer may actually be one of their greatest competitive advantages, with a selection that often trounces that of their bricks-and-mortar rivals.
Offline retailers now face a difficult balancing act, trying to trade cost savings against customer satisfaction. And beneath their tightrope, hungry Web-based companies wait, salivating at the thought that they can provide more of the items increasingly missing from skimpier shelves.
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