The Rule of 17: A Proven Strategy to Eliminate Item Duplication and Drive Sales 

One critical factor to achieving success in retail is understanding consumer behavior.

Every day, the average consumer makes tens of thousands of decisions, driven in part by habits, impulses and even laziness. When pushed beyond the threshold, decision paralysis is induced — the paradox of choice. In retail, a proliferation of products within categories is translated into less-than-stellar sales performance.

This, combined with the process of assortment planning, is a phrase I developed called “Rule of 17.” The rationale is that up to 17 percent of the items in a category may be considered duplicative, thereby reducing sales productivity and profitability. In other words, more choices aren't always the answer.

This concept is vividly illustrated in Barry Schwartz's book, “The Paradox of Choice.” In the book, Schwartz presents an anecdote involving a fictional jam manufacturer, Colman Purdie. Initially, the company limited its offerings to just three jam varieties — orange marmalade, apricot, and strawberry. However, to cater to consumers' appetite for variety, the company expanded its selection to 24 different jams, featuring various fruit and berry combinations. While the expanded selection sparked significantly greater interest from shoppers, it ultimately failed to boost sales. In fact, sales were lower than when the company had just three choices.

The Rule of 17 underscores the opportunity and necessity of reducing category duplication as a matter of priority. Through rationalization of duplicative items, retailers can create advantages such as the following:

1. Increased sales: Eliminating duplicate products streamlines the decision-making process for consumers, leading to increased purchases.
2. Improved inventory turns: With higher-performing SKUs, inventory turnover rates improve, boosting profitability and overall revenue.
3. Enhanced profitability: Reducing excess inventory on the shelf and in the warehouse lowers holding costs and frees up resources for other strategic initiatives.
4. Strengthened competitiveness: Optimized assortments enable retailers to respond more effectively to market trends and consumer preferences.

Successful discounters like Lidl and Aldi, and member clubs like Costco, have embraced the concept of lean assortments, offering a limited selection of products within each category. This approach simplifies the shopping experience for customers and reduces supply chain costs. For retailers with extensive existing assortments, rationalization requires a delicate balance to avoid negatively impacting customer perception of choice and loyalty.

Before making cuts in a category, retailers must understand the value each product holds for customers. While profitability is a factor, it shouldn't be the leading determinant. Retailers need to analyze transferable demand and other relevant metrics to gain insights into customer decision-making processes.

Technology can play an outsized role in helping retailers better understand how their customers value their products, and which ones are most profitable to keep on the shelves.

Artificial intelligence and machine learning can rationalize assortments through in-depth analysis of many sales, baskets and loyalty data by capturing true duplication at a granular level. These technologies also predict how removing a certain product can help a category perform better and improve satisfaction with a store or online retailer.

AI-powered insights empower retailers to move away from traditional calendar-based resets and adopt agile assortment optimization. This approach allows for continuous refinements based on real-time market trends and consumer behavior, leading to improved forecast accuracy, streamlined inventory management, and more predictable demand.

By following the Rule of 17, retailers can better understand the paradox of choice and focus on consumer value. Optimizing their inventories through AI-driven insights can lead to profitable revenue growth, enhanced operational efficiency, and a superior shopping experience for customers. Instead of decision paralysis, customers make quick and simple choices to get the products they want, and retailers don’t have to waste shelf space and other resources trying to push products that won’t sell.

Kevin Sterneckert is vice president of strategic alliances at RELEX Solutions, a unified supply chain and retail planning platform.