Retailers from BJ's Wholesale Club to Lululemon are cutting the number of items they carry, and the pattern is broad enough to count as a strategy rather than a series of one-off decisions. Dollar General trimmed about 1,500 SKUs in March, Under Armour has reduced SKUs by roughly 25 percent over the past few years and plans another 25 percent, and BJ's has said it will remove about 20 percent. The stated reason is balance-sheet discipline, but the operational consequences reach much further than inventory lines.
Key Conclusions
The first conclusion is that assortment reduction is a working-capital move before it is a merchandising move. roughly 20 percent of SKUs at BJ's（CNBC） translates into fewer units to buy, fewer positions to hold in the distribution centre and less cash tied up in slow-moving inventory. In an environment where shoppers are pulling back on discretionary spending and financing costs remain material, releasing cash from inventory is one of the few levers a retailer can pull without asking customers for more money.
The second conclusion is that the risk sits in the tail, not in the headline number. Cutting twenty percent of SKUs is straightforward when the items are genuinely redundant, and much harder when they are low-volume but high-attachment products that specific customers rely on. Those items rarely show up in aggregate sales reports, but they show up in trips, because a shopper who cannot find a preferred item may abandon the whole basket rather than substitute. The merchandising question is therefore not how much to cut but where the cut lands.
How Retailers Decide What Goes
Most programmes start with a simple screen: sales velocity, gross margin, inventory turns and days of supply. Items that rank poorly on all four are easy candidates. The difficulty begins with the items that rank well on one dimension and poorly on another, for example a slow-selling item with a very high margin, or a fast-selling item with almost no margin. These are the cases where a mechanical rule produces a bad outcome, and where category managers earn their salary.
The role of basket attachment
Basket attachment is the missing variable in most SKU rationalisation models. An item that sells in low volume but appears in a high proportion of large baskets is doing work that its own sales line does not show, because removing it can reduce the size of the trips it participates in. Measuring attachment requires transaction-level data rather than item-level summaries, and it changes the ranking materially. Retailers that skip this step tend to cut items that look unproductive and then wonder why average basket value declines in the following quarter.
Private label as the replacement
Removing national brands creates space that private label can occupy, and that is often the unstated purpose of the programme. A retailer that removes three similar branded items and replaces them with one owned-brand item keeps the shelf full while improving margin and simplifying supply. The risk is that customers who wanted a specific brand interpret the change as a reduction in choice rather than a curation decision, so the communication and the shelf presentation have to make the substitution feel deliberate rather than like a gap.
Best Practices
Three practices separate programmes that work from programmes that backfire. Cut by category role rather than by uniform percentage, protect the items that drive trips even when their own volume is low, and phase the reduction so that shelf resets and supply changes do not land in the same week. Each practice is about sequencing and segmentation, and none of them requires new systems.
Cut by category role
Categories play different roles: some drive traffic, some drive margin, some exist to complete a basket and some are convenience purchases. A uniform twenty percent cut treats all four the same way and predictably damages the traffic categories, because those contain the items customers come for. A role-based approach sets a different target for each category and protects the destination items inside traffic categories, which is where the risk of losing a trip is concentrated.
Phase resets and supply changes
Timing matters more than most plans acknowledge. If shelf resets, planogram changes and supplier run-down all happen in the same month, stores absorb a spike of work while carrying transitional inventory in already constrained back rooms. Spreading the reduction across two or three waves, with resets scheduled away from peak trading periods, keeps the operation stable and gives category managers time to observe what the first wave did to baskets before committing the second.
Common Mistakes
The first common mistake is to treat the SKU count as the objective rather than the outcome. A programme that hits its percentage target while losing trips has failed, even if the inventory line looks better. The second mistake is to measure success only on the cost side. Fewer SKUs reduce handling, but they also reduce the number of reasons a customer has to visit, and those two effects move in opposite directions, so the evaluation has to include trip frequency and basket value rather than purchase cost alone.
The third mistake is to under-invest in the shelf after the cut. Removing items leaves gaps that must be filled with better presentation, clearer signage and, in many cases, wider facings of the remaining items. A shelf that looks sparse signals to customers that something is wrong, even when the assortment is deliberately curated. The reset is part of the programme, not an afterthought, and stores that execute it well convert a reduction into a cleaner shopping experience.
What It Means for Suppliers
For suppliers, assortment reduction changes the nature of the negotiation. When a retailer is removing items, the question shifts from how much shelf space a brand can win to whether a specific item can justify its position, and justification increasingly requires evidence about attachment, incrementality and role within the category. Brands that arrive with basket-level analysis rather than brand-level enthusiasm are more likely to keep their positions, because they are answering the question the retailer is actually asking.
The second implication is that the tail becomes contested. Items that survive a twenty percent cut in one retailer become candidates for the next retailer's programme, and a brand that loses distribution in two large accounts can find itself below the threshold needed to support national marketing. Suppliers should therefore expect SKU reviews to become a continuous process rather than an episodic event, and build the data capability to respond quickly when a review is announced.
Summary
The wave of SKU cuts from BJ's to Lululemon is best understood as a working-capital and shelf-productivity programme with a merchandising decision at its centre. The headline percentage is the easy part; the difficult part is deciding which items carry attachment value that their own sales line does not reveal, and sequencing the change so that stores can absorb it.
The practical playbook is role-based targets, protection of trip drivers, phased execution and evaluation that includes basket value and trip frequency. Retailers that follow it will end up with a leaner assortment that still brings customers in. Those that chase a percentage will hit the number and then spend the next two quarters explaining why traffic fell.
Data Sources
1. CNBC: From BJs to Lululemon retailers are trimming assortments
2. CNBC: Barclays sees gains as shoppers prioritize self-care
3. CNBC: Levi Strauss hikes profit guidance after tariff refunds
FAQ
How large are the SKU reductions?
A: Dollar General trimmed about 1,500 SKUs in March, Under Armour cut roughly 25 percent and plans another 25 percent, and BJ's Wholesale Club plans to remove about 20 percent of SKUs.
Why are retailers cutting now?
A: Shoppers are pulling back on discretionary spending and financing costs remain material, so releasing cash from inventory is one of the few levers available without asking customers for more money.
What is basket attachment?
A: The degree to which an item appears in large baskets. A low-volume item with high attachment contributes to trip size, so removing it can reduce basket value even though its own sales line looks weak.
Why is a uniform percentage cut risky?
A: Categories play different roles. A uniform cut treats traffic drivers like convenience items and tends to damage the categories customers visit for, which is where trip loss originates.
How should the cut be sequenced?
A: Spread it across two or three waves and schedule shelf resets away from peak trading, so stores are not absorbing resets, planogram changes and supplier run-down at the same time.
What should suppliers bring to a review?
A: Basket-level evidence on attachment, incrementality and category role. Justification increasingly depends on transaction data rather than brand-level arguments about awareness.
References
1. CNBC: From BJ's to Lululemon, retailers are trimming assortments to boost business
2. CNBC: Barclays sees big gains for this consumer stock as shoppers prioritize self-care
3. CNBC: Levi Strauss hikes profit guidance after tariff refunds, but not sales outlook
