How many SKUs is too many?

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Eric Brown
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How many SKUs is too many?

#1 Post by Eric Brown » January 4th, 2011, 3:08 pm

For a 1500 sq ft brick-and-mortar store focusing on personally curated Old World wines. I hear different opinions from different people on the topic. From a consumer standpoint I like to have as many choices as possible, but if the store has less SKUs but are diverse, and very well thought out then I spend less time looking and probably spend more $$$. I know a lot of it is subjective (what constitutes a lot of SKUs, my idea of a "well thought out selections" may not be the same as the next persons').
Last edited by Eric Brown on January 5th, 2011, 6:06 pm, edited 1 time in total.

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Bruce Leiser_owitz
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Re: How many SKUs is to many?

#2 Post by Bruce Leiser_owitz » January 5th, 2011, 12:09 pm

Eric--I certainly can't give you a number, but here are a couple of factors to consider:

1. What is your clientele and what do they expect/want? I don't know your city well, so I don't know what a wine shopper there is looking for. But MOST wine shoppers like larger stores with more SKU's from which to choose. So if you're going with a more limited selection, then you have to have customers who are willing to be hand-sold from a limited and unique selection.

2. What is your competition, esp. in your niche of the market, and what do they do? For example, if your store has sections on Italian and German wines, what are the other major retailers doing in terms of pricing and selection for those wine regions? Put another way, if a shopper in your city has five stores from which to select for decent Italian wines, why should they buy from yours?

Bruce
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Re: How many SKUs is to many?

#3 Post by Dave Egan » January 5th, 2011, 5:17 pm

All good points, Bruce.

Here's one data point - we have about 1275 SKUs in a shop with a sales floor of about 650SF. It looks great having the wine packed in like that, but we have to work to convince people that we have selection because of the small space. Frankly, I think 1275 is a bit too many to have and really hand-sell. There are plenty of wines on the shelf that just sit because I never recommend them. I've forgotten what they taste like!
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Re: How many SKUs is to many?

#4 Post by Ken V » January 5th, 2011, 6:01 pm

Eric Brown wrote:How many SKUs is to many?
How many o's is too few? [wink.gif]
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Eric Brown
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Re: How many SKUs is to many?

#5 Post by Eric Brown » January 5th, 2011, 6:08 pm

K V a s t o l a wrote:
Eric Brown wrote:How many SKUs is to many?
How many o's is too few? [wink.gif]

Typo fixed blush

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Brent C l a y t o n
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Re: How many SKUs is to many?

#6 Post by Brent C l a y t o n » January 5th, 2011, 6:09 pm

I think it also heavily depends on your layout and storage conditions. A 1500sqft store w/no basement is different than a 1500sqft store w/a 1500sqft basement. Also, are you stacking or racking? Do you have a TC room or just a couple of Eurocaves?

Also what can you sell? Beer, wine & liquor plus grocery? Beer & wine only? Liquor & wine only? Lots of variables.

I could be pretty comfortable with 2000-3000 SKU's here in NY selling wine & liquor only.
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Eric Brown
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Re: How many SKUs is to many?

#7 Post by Eric Brown » January 5th, 2011, 6:20 pm

Bruce Leiserowitz wrote:Eric--I certainly can't give you a number, but here are a couple of factors to consider:

1. What is your clientele and what do they expect/want? I don't know your city well, so I don't know what a wine shopper there is looking for. But MOST wine shoppers like larger stores with more SKU's from which to choose. So if you're going with a more limited selection, then you have to have customers who are willing to be hand-sold from a limited and unique selection.

2. What is your competition, esp. in your niche of the market, and what do they do? For example, if your store has sections on Italian and German wines, what are the other major retailers doing in terms of pricing and selection for those wine regions? Put another way, if a shopper in your city has five stores from which to select for decent Italian wines, why should they buy from yours?

Bruce
Great points Bruce thank you for the response!

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Re: How many SKUs is to many?

#8 Post by Eric Brown » January 5th, 2011, 6:26 pm

Brent Clayton wrote:I think it also heavily depends on your layout and storage conditions. A 1500sqft store w/no basement is different than a 1500sqft store w/a 1500sqft basement. Also, are you stacking or racking? Do you have a TC room or just a couple of Eurocaves?

Also what can you sell? Beer, wine & liquor plus grocery? Beer & wine only? Liquor & wine only? Lots of variables.

I could be pretty comfortable with 2000-3000 SKU's here in NY selling wine & liquor only.
Wine only displayed on commercial storage bins/from Wine Cellar Innovations with 5-6 island racks. Only approx. 1100 sq. feet is dedicated to the sales floor with the rest being storage and a tasting room/area with some small refrigerated units.

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Re: How many SKUs is to many?

#9 Post by Bruce Leiser_owitz » January 5th, 2011, 7:59 pm

Eric Brown wrote:
Bruce Leiserowitz wrote:Eric--I certainly can't give you a number, but here are a couple of factors to consider:

1. What is your clientele and what do they expect/want? I don't know your city well, so I don't know what a wine shopper there is looking for. But MOST wine shoppers like larger stores with more SKU's from which to choose. So if you're going with a more limited selection, then you have to have customers who are willing to be hand-sold from a limited and unique selection.

2. What is your competition, esp. in your niche of the market, and what do they do? For example, if your store has sections on Italian and German wines, what are the other major retailers doing in terms of pricing and selection for those wine regions? Put another way, if a shopper in your city has five stores from which to select for decent Italian wines, why should they buy from yours?

Bruce
Great points Bruce thank you for the response!
A long time ago, in a land far away, I worked in a fairly small wine retail store. I don't know the SKU's offhand, but it was probably a smaller store size-wise than the one you are talking about. It was definitely a hand-sell sort of operation. Some of the reasons it worked:

1. It was a neighborhood joint in a fairly affluent neighborhood, and there was also a decent amount of foot traffic in the area. Although there were larger stores in the metro area, we weren't trying to compete with them.

2. This was long before the days of Internet wine shopping, when people could easily compare prices online. Although our prices were neither the highest nor the lowest, we were mostly catering to a very neighborhood crowd that typically bought 3-6 bottles per trip, and often bought wines for that night. With that crowd, we didn't need to carry lots of inventory; just enough of a variety to keep the locals from buying generic drek from area grocery stores.

Bruce
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Re: How many SKUs is too many?

#10 Post by chaad thomas » January 7th, 2011, 5:51 pm

I say fewer SKUs, like a couple hundred max, purchased from a few of the smaller distributors.

In this way, you can focus your sales efforts and move more volume of any given wine. You won't worry about competing in the big-brand-race-to-the-bottom that's taken over the large retailers, and you'll get the service you need as an indie and be a bigger fish to your vendors.
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Re: How many SKUs is too many?

#11 Post by PeterJ » January 7th, 2011, 7:57 pm

Yes. I'd agree to keep the SKUs down to the lowest level you think will give you a good look and a competitive position. That's may sound subjective, but it is really a rather simple combination of visual and selling cues. You want to look serious and BE serious in your category representations.

The best pricing generally comes from multi-case buys of the same wine (and/or winery), combined with 'family' discounts of multiple cases from the same distributor/broker. IMHO you need to do a good job on your marketing concept, but maximizing gross profit is the first step in being sure you stick around. A wise retailer once reminded me of the unwritten law of retailing that you can't come out with a higher profit margin than you begin with (Duh!). The negative to narrow and deep is, of course, that you need to turn your inventory. Most small shops will have a problem with 3 to 5 case buys of any SKU, especially at the beginning. Feel it out and get aggressive where you can do it with confidence. Also, be fair but tough in your price negotiating. Just my 2¢.
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Re: How many SKUs is to many?

#12 Post by Mike Stoneking » January 8th, 2011, 8:20 pm

Eric Brown wrote:
K V a s t o l a wrote:
Eric Brown wrote:How many SKUs is to many?
How many o's is too few? [wink.gif]

Typo fixed blush
Ken, this was a test for yu!! neener
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Re: How many SKUs is to many?

#13 Post by Ken V » January 9th, 2011, 9:18 am

Mike Stoneking wrote:
Eric Brown wrote:
K V a s t o l a wrote: How many o's is too few? [wink.gif]

Typo fixed blush
Ken, this was a test for yu!! neener
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