Optimization of the Offer in Retail: An Opportunity to Rethink Customer Strategy

Clément Delille, Manager Data Business Consulting and expert in the retail sector and category management, shares his insights on offer management, a central lever in a complex ecosystem and crucial for a retailer’s performance.

Key Takeaways:

• In response to inflation and reduced consumer spending, many retailers are considering downsizing their product assortment. The challenge? Ensuring profitability without compromising customer satisfaction.
• Streamlining the product offering with a customer-centric and holistic approach presents a significant growth opportunity. Robust technology, effective tools, and deep industry expertise are essential to maximize the benefits.
• This is an ideal opportunity to rethink the product strategy, enhance the customer journey, and strengthen collaboration between retailers and suppliers to avoid diminishing the in-store customer experience. 

2023: Inflation and New Consumer Behaviors in France

In the face of rising inflation, French consumers are adjusting their habits.

They are cutting back on spending: -4% in volume for large-scale retailers (according to Kantar) and -3% for specialty stores (Procos). At the same time, another trend is emerging: a growing preference for private label brands, which are perceived as more affordable.

In response to this shift, retailers are making assortment rationalization a cornerstone of their strategy.

The result? A 4% reduction in product references in hypermarkets this year and a 7% decrease in drive-through offerings (NielsenIQ). Private labels are benefiting from this trend, taking precedence over national brands. In fact, private labels have already gained 3 percentage points in specialty stores in the home appliance segment. Carrefour, for example, is aiming for an impressive 40% of its revenue from private labels by 2026(1).

Optimizing Profitability: The Triptych of Inflation, Declining Consumption, and Assortment Rationalization

Amid declining consumption, retailers are seeking margins beyond volume growth. The prevailing idea: tightening the belt on the assortment by prioritizing ultra-profitable references.

This movement towards rationalization is not a new phenomenon. It follows decades of assortment expansion, with product references in large-scale retail (GSA) stores growing from 7,000 to 30,000 in just 30 years(4). The consequences are clear: less clarity for consumers, reduced product visibility, and increased risks of stockouts.

At the same time, the assortment remains a critical issue in negotiations between retailers and manufacturers, as retailers heavily rely on trade budgets to keep their shelves active. An excess of referenced SKUs sometimes leads to “stuffing” shelf space with different package sizes to secure trade deals.

Retailers like Intermarché, Decathlon, and Carrefour have recognized the importance of a balanced and well-managed assortment. Carrefour, for instance, plans to reduce its food references by 20% and its non-food references by 40% by 2026(3).

This strategy isn’t entirely new: Costco has implemented it for years with a limited assortment, rapid stock turnover, and a focus on high-margin products. Its subscription model ensures financial stability, reducing dependence on trade marketing budgets.

But how can retailers reduce their assortment while still meeting consumer demand for variety and differentiation? Where should the line be drawn between assortment rationalization and meeting consumer needs? How can retailers avoid the perception of “empty” shelves?

Another key challenge is balancing national brands with private labels. The solution isn’t simply to replace one with the other. Each category has its own nuances. Moreover, what type of private label should be prioritized—entry-level, organic, or premium? When the retailer is also the manufacturer, the question of industrial capacity to meet the new demand arises.

This reflection challenges the traditional approach to assortment, often operated in a fixed, siloed, product-centered manner that needs to evolve.

The goal: an assortment better aligned with consumer needs and consumption moments.

Rationalizing for What Purpose?

Reducing the assortment may seem like a response to economic challenges, but it carries risks. Stores that adopt this approach often record below-average performance. Over-restricting the assortment risks leaving consumer needs unmet, potentially resulting in lost sales. Striking the right balance is crucial: for GSA retailers, a reduction of more than 15% can jeopardize revenue; in some categories, the threshold is as low as 5%(5).

Today, 40% of national brand offerings in GSA generate 99% of the revenue(5). The temptation might be to simplify the assortment by focusing on private labels, but this strategy comes with potential costs: fewer innovations, promotions, and in-store activities, reducing the overall attractiveness of the shelves—often driven by manufacturers’ trade budgets.

Relying solely on numbers can be misleading. Top sellers do not always reflect the true value of a brand or product to loyal customers. If decisions were based strictly on statistics, it could lead to absurd extremes, such as selling only the highest-performing items, like eggs in GSA.

It is essential to align the assortment with the actual needs of customers and move beyond outdated methods:

• Emphasize the fluidity of the customer journey rather than rigid product silos.
• Think in terms of consumption universes and moments.
• Prioritize diversity and added value instead of oversimplifying national brands versus private labels.
• Embrace collaboration rather than confrontation.

A short-term, cost-centered rationalization strategy is not the solution. The product assortment must be considered holistically, involving all distribution stakeholders. This approach demands intensive collaboration, both internally and with suppliers.

The example of Tesco’s ‘Reset’ in 2015 is telling: by reducing the number of brands, the retailer strengthened its collaboration with the remaining brands, refining its overall assortment strategy.

Similarly, Castorama, after facing challenges in 2016 due to assortment reductions, course-corrected in 2023 by refocusing on the customer, reintroducing national brands, and optimizing the customer journey(6).

Assortment rationalization: an opportunity to rethink customer strategy and enhance collaboration between retailers and manufacturers!

Developing a product offering requires a systemic vision that merges data with execution. Here are our key principles:

• “Life-centric”: The New Customer Paradigm

According to a Kantar study, 84% of customers abandon a brand that disregards their preferences(7). More than ever, it is crucial to delve into the complexity of consumer behaviors, changing habits, paradoxes, and life moments.

The organic sector perfectly illustrates how haste can lead to erroneous conclusions. While many French consumers claim to want organic products, economic realities confront them, leading to a significant decline in organic consumption.

It is essential to adjust, but it’s difficult to imagine halting a deep movement that has been in progress for two decades. Retailers must combine current agility with a long-term vision to be prepared when the situation shifts.

• Break the Barriers: A Multi-Faceted Vision of the Offer

In a landscape influenced by legislation and market dynamics, adaptability reigns supreme. A strong responsiveness and even anticipation are necessary to constantly readjust the model. Similar to Zara, which tests before mass production, being agile is crucial.

This strategy must be continuously managed using appropriate data, decision-support tools, and an agile organization. Given the increasing complexity of tasks, with the proliferation of tools, data, and levers, the teams responsible for the offer—often young and subject to high turnover—require optimized tools and processes. These should guide decision-making, provide in-depth analysis, and clarify the potential impact of their choices.

• Agility and Proactivity Are Key

In a landscape influenced by legislation and market dynamics, adaptability reigns supreme. Strong responsiveness and even anticipation are necessary to constantly readjust the model. Similar to Zara, which tests before mass production, being agile is crucial.

This strategy must be continuously managed using appropriate data, decision-support tools, and an agile organization. Given the increasing complexity of tasks, with the proliferation of tools, data, and levers, the teams responsible for the offer—often young and subject to high turnover—require optimized tools and processes. These should guide decision-making, provide in-depth analysis, and clarify the potential impact of their choices.

• The Offer: A Collective Endeavor

Distributors and manufacturers must work more closely together. The rationalization of the offer is an opportunity to rethink collaboration and consider a greater sharing of insights from each party with a common goal: customer satisfaction. Such collaboration can uncover several additional growth points.

To transform perspectives, it is also essential to optimize by sharing and leveraging the opportunities provided by the explosion of retail media.

Your Compass in Data-Driven Offer Strategy

Managing an offer without relevant data is like navigating without a compass. Despite the proliferation of tools, true industry knowledge is irreplaceable.

With a mastery that combines data, technology, and sector expertise, Converteo is your ally in refining your offer management—from defining the strategy to its operational implementation.

Sources : 

1. Linéaire “Ce qu’il faut retenir du plan Carrefour 2026”
2. GFK pour Neomag
3. La tribune 2023
4. LSA – Grocery stores 40.000 more items than they did in the 1990s (Market Watch 2017) et Entretien Michel Edouard Leclerc La dépêche 2022
5. Le dossier grande conso edition Dauvers x NielsenIQ 2023
6. Challenge – 2023
7.  Etude Kantar 2021 – How customer centricity can power business success (kantar.com

Article written with the contribution of Madrigale Darpas