Shrinking variety

A recurring theme in how the pandemic has changed operations has been that firms are limiting variety. If a firm is having a hard time keeping up with demand surges and shifts, then a basic step is to drop the low runners and focus on the products most in demand. Now the Wall Street Journal has some data on just how significant the impact has been (Why the American Consumer Has Fewer Choices—Maybe for Good, June 27). The graph above shows compares several weeks in May and June this year with the same span last year. The average across all categories is down 7.3%.

There is a similar story at restaurants, where firms have limited their menus to simplify operations,

So will this last? Some firms cited in the article seem committed to having a simpler range offerings.

Toilet-paper demand early in the pandemic led paper-products company Georgia-Pacific LLC to switch all production of its Quilted Northern toilet paper to 328-sheet rolls; it had been also producing the brand in 164-sheet rolls. The company, owned by Koch Industries Inc., said it plans to stick with the bigger rolls even after the pandemic, which let it speed production and make distribution more efficient. Retailers had an easier time keeping Northern toilet paper in stock by having fewer varieties on shelves. …

Darden Restaurants Inc. said it was going to largely keep slimmed-down menus it started during the pandemic, which have helped reduce prep work and costs. The owner of Olive Garden and other chains said it would bring back only a few menu items that were removed, and executives said the trend was a rare upside of the pandemic on its business.

I think that the more appropriate question may be how long this trend will last. If you are more pessimistic than Wall Street traders, you may well believe that we are looking at a long period of slow economic growth and tight consumer incomes. If that’s the case, it is easy to imagine that firms will stick with cost-cutting measures. However, if the economy turns around sooner rather than later, it’s harder to see company’s sticking with their cost cutting religion. At some point, the Olive Garden is going to want to advertise some new offering to build excitement and draw people in. The menu will start to grow again.