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Recession-Weary Consumers Desperate for Fewer Choices

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Retailers slash product choices to drive sales.

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"Quality is a characteristic of thought and statement that is recognized by a non-thinking process. Because definitions are a product of rigid, formal thinking, quality cannot be defined."
- Robert Pirsig, Zen and the Art of Motorcycle Maintenance

Retailers, reacting to the ongoing structural shift away from excessive consumerism, are beginning to choose quality over quantity.

Finally.

This morning's Wall Street Journal highlights efforts by stores like Target (TGT), Wallgreens (WAG), and Wal-Mart (WMT) to reduce their product offerings, limit shelf clutter, and generally simplify the consumer's shopping experiences. Suppliers like ConAgra (CAG) and Clorox (CLX) are also trying to get ahead of the curve, and are reducing the variety of their offerings.

As shoppers become more selective, confronting a dizzying array of salad-dressing options inspires many to simply throw up their hands and go with a brand they know. As one customer told the Journal: "There are too many choices. I just went with Kraft (KFT), because I know Kraft."

This trend clearly favors dominant brands, since smaller, lesser-known varieties will be muscled out by firms able to spend millions on marketing. And while this may stifle innovation in the cutting-edge barbecue-sauce industry, stiffer competition ultimately weeds out the weak, thereby making room for real future innovation. As sales become concentrated inside big, often stodgy conglomerates, nimble upstarts have a chance to move in with new and improved products.

In eliminating superfluous brands, products, and package sizes, retailers are also slashing inventories -- a key part of rebalancing consumer demand with supply, and a necessary component of any sustainable economic recovery.

Wal-Mart, the world's largest retailer, isn't just slimming down its offerings. After analyzing sales patterns, the company discovered that, in market segments with growing sales -- flatscreen televisions, men's shaving cream, and garbage bags, for example -- increasing variety actually helped sales.

On the other hand, when consumers begin to shun certain products (toilet paper, mouthwash, and microwave popcorn, for example), fewer choices actually helped stem the decline.

And while it looks like Americans now prefer frequent shaving over the regular use of toilet paper, swapping variety for simplicity represents a healthy shift in priorities. Consumer spending, once directed towards glitzy status symbols (hey, even fancy barbecue sauce became a social marker), is now focusing on the useful and necessary.

This -- despite its grim implications for purveyors of the sleek and pointless -- is a good thing.
No positions in stocks mentioned.

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