Most DTC brands are carrying too many SKUs.
Mostly dead weights.
Most brands, including our clients, can remove 40-50% of their product range without any substantial loss (max 10% or less).
A few obvious benefits are –
- High margins (due to increased purchasing power)
- Better inventory management (due to lower counts)
- Low operational challenges
But from a marketing perspective, it leads to –
Higher conversion rates.
Remember the famous Jam case study. More options lead to action paralysis.
With a few products, you can provide a detailed product page and shopping experience (like Apple).
Also, it saves you from wasting advertising dollars on low converting product range.
Higher customer loyalty
Low SKUs enable a better connection for the customer as well. They expect and get a more consistent experience.
Due to a higher focus on product quality, they associate the brand with specific, high-quality offerings.
Brands agree to the benefits of carrying a small range but still take too long to pull the trigger.
The most common argument I hear is around cross-selling, and repeat purchases.
More products lead to more options for brands to promote.
I agree.
But you don’t need to launch new product lines that just sit there. You can always do that with –
- Launching limited editions
- Exclusive drop
- Variations of color or flavor.
Launching and removing product lines creates a different buzz than carrying non-performing items.
Product portfolio optimization is crucial to profitable growth.
Optimizing your product lineup every quarter can help you reduce your costs, and improve margins, conversion rates, and retention rates.