Think of it as Economic Natural Selection

I was once invited to stop and think about how many different variations of Chevrolet you can buy. Today, with all of the different models, colors, styles and options, there are literally thousands of combinations and permutations; your choices are virtually limitless (and some might say, “Utterly confusing”)!

But enough about cars… let’s talk about frozen pizza. Recently, I counted-off the floor tiles at my local “Everyday Low Price format” grocer... to learn they offered 84 linear feet of frozen pizza, showcased in a row of freezers that are eight feet tall. And while there were some mild price point variations—and a couple of distinctions between thick and thin crust—for the most part, it was dozens of different brands of virtually the same pepperoni, sausage or cheese flavors.

It all begs the question, “When is enough enough?” And the current recessionary economy could well demonstrate that the current “enough” is way too much. I don’t think of myself as a futurist, but this is a matter of cause and effect. A recent story in the New York Times makes a great case for the idea that in the future, car companies will be dramatically smaller… which has the likely effect of offering a smaller menu of vehicle options. Another story—a commentary published in Marketing Daily—suggests that the downturn will (or should) cause retailers to dial-down on the number of SKUs they offer, offering choices people really want, and sacrificing those products which are merely offered for the sake of creating an image for variety/selection.

And it’s not just products that could vanish from store shelves. The shelves, themselves, are likely to disappear in large numbers, according to a recent story from CNN/Money.

Implications: If you’re a packaged goods manufacturer, anticipate volatile (if not simply higher) prices for the real estate where your product is sold (the facings you receive at retail). Merchants are disenchanted with the idea of carrying products whose only distinction is a nuance… and which inspires purchases that could be called few or infrequent. You will need to offer more than a product. You’ll be increasingly expected to have ideas about how to help the retailer sell it.

If you’re a consumer (and you are), prepare for a future that could include with fewer choices, where unusual or unique products are concerned. (Again, I offer a range of options, not a set of predictions.) In fact, you might be heading for a return to the day when shopping required, well… shopping.

If you’re a retailer, you know that catering to the nuances of different consumers can be very expensive. It means you have to stock a lot of inventory… much of it interesting to only a few rare customers. As the recession makes reducing SKUs attractive, prepare to offer your customers alternatives to products they counted on you to offer. And consider what front-end (customer) services need enhancement… as a means of offering a fulfilling shopping experience amid sometimes diminished consumer choice.

Finally—and I think this goes for all of us—anticipate a roller-coaster of price fluctuations. On one hand, when supply (inventory) goes down, prices generally go up. But in a competitive environment—where so many producers and retailers are fighting for their very survival—it could be that prices get caught in the crossfire, and are forced to stay low.

We live in an economic ecosystem where not all products and purveyors will survive. It is ironic that choice is likely to be among the most obvious casualties… where economic “natural selection” is the driving force.

Mike Anderson