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Best Buy then relates the product assortment and availability to services in 56 COMPETING IN TOUGH TIMES each of its stores based on the representation of each segment. Stores with high concentrations of Jill customers may have inexpensive computers for children, whereas stores with high percentages of Russ customers have high proportions of high-end elaborate home entertainment systems. To retailers, product proliferation has five major disadvantages, as follows: • The additional costs associated with pricing, record keeping, and carrying additional inventory • Category management issues • Stockout concerns • Reduced overall sales levels • Consumer confusion/stress concerns The added costs associated with product proliferation include ordering costs, store rent, utilities, warehousing expenses, item pricing-related costs, the loss of quantity discounts, and the reduced productivity due to ordering small quantities from a multitude of suppliers.
Whole Foods’ stores spend most of their marketing budgets on signage and on in-store events such as taste fairs, classes, tours, and product samplings. Better Utilizing Employees Because payroll and employee benefit costs can account for close to 16 percent of a store’s sales, grocery retailers need to pay particular attention to labor utilization. To reduce employee costs, Costco has no sales associates with the exception of consumer electronics and jewelry. These product categories are relatively costly, have technical issues that may need explanation, and are also characterized by high levels of perceived risk on the part of consumers.
Bean was also able to reduce its number of vendors supplying knitted products from 60 to 6 vendors as part of this review process. 23 Retailers can also utilize micromarketing programs that purposely varies selection by store or geographic region. Best Buy, as part of its customer-centricity strategy, categorizes each of its more than 900 stores into customer segments. Its “Barry” segment is a young professional male, “Russ” is a young entertainment enthusiast, “Jill” customers are upscale suburban moms, and “Ray” is a married middle-class male.