"Stock Keeping Unit" or "SKU" is a term used by retailers to specify a particular variation of an item. Every distinct product in a store has an SKU. Marketers use the term as if it were a word, not an acronym. We say "scew," not S.K.U.
I was talking to a client recently about experimenting with product variation on the shelf. "Let’s do what Snapple did. Put a variety of things on the shelf and see what sells." "No," I was told, "this might work at a Mom and Pop. It will not work at Kroger."
Kroger insists that every product have one and only one SKU. No variations are allowed. No experiment will be endured. The slot on the shelf must be occupied by its designated SKU and nothing else. There is, in other words, an unbreakable link between certain products and certain spaces, and this link is policed by the SKU.
It is clear that Kroger has deep motives for this deployment of the SKU system. Partly, it is a book keeping issue. And this is important for many reasons, including the fact that Kroger sells its in-store data. Also, the SKU system is a way of enforcing slotting fees, another important source of store revenue.
But the consequences for the brand are clear. The store shelve cannot to be used for experimentation. As the world becomes more dynamic, as consumers become harder to read, this is an opportunity that goes missing. (And not a small one, either. Snapple used shelf experimentation as a path to glory in the 1990s.)
But perhaps there are consequences for the grocery chain. After all, the difference between Kroger and Whole Foods is, to some extent, the fact that the former is too static while the latter blooms with variety and change. (This is the difference between Whole Foods and the new comer Central Market.)
We might argue that the the Whole Foods category opened up, to some extent, precisely because the grocery chains refused to allow the brands to serve them as "partners in dynamism." Shutting brand experiment out of the store was a bad idea. It meant that the brand could not add the consumer experience that is so evident in Whole Foods. A source of variation and experimentation went untapped.
I am not saying that Whole Foods does not use the SKU system. I am saying that it is hard for me to believe that they use it as restrictively as does Kroger. This may be one example of where short term advantage has expensive long term effects for the chain, shutting out dynamism that is important to vital brands and vital channels.