Why Retailers Are Shrinking Their Assortments

Retailers and brands across multiple sectors—including Lululemon, Nike, Dollar General, BJ's Wholesale Club, and Under Armour—are actively cutting their product assortments. SKUs (stock keeping units) are unique codes that track individual products by manufacturer, type, color, and size. While companies traditionally grow by adding products, excess inventory often leads to poor-selling items that require discounting, which reduces profitability and can damage brand reputation when products end up at off-price retailers like TJ Maxx.

For individual brands, assortment reduction is a strategic move to improve financial health. Lululemon exemplifies this approach: despite growing sales by $500 million from 2024 to 2025, its operating profit fell by $300 million due to markdowns. The company cut North American SKUs by 15% to address this. The underlying strategy is counterintuitive—by selling fewer products at higher full retail prices with minimal discounting, companies can achieve greater profitability even with reduced overall revenue. There is a general consensus that brands reach a healthy saturation level at $3-4 billion in revenue; beyond that, even excellent products become dilutive when oversupplied.

Nike represents an exception, maintaining around $20 billion in North America through distinctly different brand portfolios like Jordan. Currently downsizing, Nike cut classic footwear franchises by over $2 billion while focusing on performance products. Under Armour has taken aggressive action, cutting SKUs by 25% with plans for another 25% reduction, explicitly stating the goal is to 'sell so much more of so many less products at a much higher full retail price.'

For large box retailers like Dollar General and BJ's Wholesale Club, assortment cuts serve a defensive purpose. These stores carry thousands of brands, and reducing SKUs simplifies inventory management and refines their offerings. Dollar General eliminated 1,500 SKUs by March 2026, opening shelf space for best-selling products and improving supply chain efficiency. However, BJ's previously acknowledged that cutting SKUs without proper curation simply reduced sales, requiring some products to be added back. The company now focuses on eliminating unnecessary choice, such as carrying both cans and two-liter bottles of the same soda.

The strategy has significant challenges. Box stores risk losing customers to competitors with broader selections. Brand-focused companies risk losing price-sensitive customers who shopped clearance sections, though companies may deliberately accept this loss since discounted sales were never highly profitable. Industry observers note that shrinking requires decisive, full commitment; half-measures fail. The broader pattern is that brands often extend past their peak through forced growth, then decline harshly, making intentional right-sizing a difficult but necessary correction.