Retailers Ditch Variety to Beat Supply-Chain Costs and Tariffs

Dow Jones
09/01

Retailers are slimming down product lines as they grapple with higher costs to import, move and store goods.

Businesses from consumer-products maker Helen of Troy to athletic-apparel retailer Under Armour are narrowing the selection of products they sell.

The strategy to focus on the most popular merchandise can help cut costs and simplify sprawling supply chains at a time when companies are coping with new U.S. tariffs and surging transportation costs.

"The volatility of the last several years has reinforced that carrying more [variety] does not necessarily mean more opportunity," said Bobby Djavaheri, vice president of Yedi Houseware, which sells home goods from dinnerware to air fryers.

"In many cases, a tighter, more carefully curated assortment allows us to buy more efficiently, manage inventory risk, and offer our retail partners better value," he said.

Yedi imports all its merchandise from China. Djavaheri said the Trump administration's on-again, off-again approach to tariffs on Chinese imports over the past 18 months led the company to pare back orders of some products and double down on others.

The strategy reverses a yearslong expansion of product selection to meet consumer demand for new colors, styles and sizes. The popularity of e-commerce fueled additional options as retailers had seemingly endless space to advertise new products online and were no longer limited to what could fit on store shelves.

But some retailers began abandoning certain product lines after grappling with product shortages and overstocks during the pandemic. The efforts accelerated over the past 18 months as new levies, surging fuel costs and uncertain consumer demand weighed on margins.

About a quarter of U.S. companies recently surveyed by professional-services company British Standards Institution said they plan to reduce the range of products they sell over the next six months.

"These supply chain challenges we've seen over the past five or six years are making them realize that it's probably simpler and cheaper to go with a smaller base of suppliers that produce a less complicated series of products," said Tony Pelli, practice director of supply-chain resilience at BSI.

"You can deal with one set of tariffs once and be done with it" instead of calculating levies for many different materials and styles, he said.

Helen of Troy, which sells products such as Hydro Flask water bottles and OXO kitchenware, said at a shareholder meeting last week it has taken measures including trimming its product selection to reduce the impact of higher U.S. tariffs.

Under Armour has cut more than 25% of its products over the past two years and is investing more in its bestselling items. "Selling so much more of so many less things at a much higher full-retail price-that's really speaking to what we're looking for," said Chief Executive Kevin Plank on an investor call Aug. 7.

Smaller businesses are also contending with how much choice to offer customers.

Clothing company zestt organics, which makes an organic-cotton scarf designed for women who travel, had worked with new factories over the past two years to develop additional products such as linen apparel. But Jessica George, one of the company's co-founders, said zestt ultimately decided to put aside the new items.

"For us to take that risk and gamble with a new factory, tariff unknowns, shipping unknowns-at this point, we are deciding that it's just not a risk that we're willing to take," she said.

 

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