The myth of the Infinite Aisle

Today’ subject was inspired by working in the trenches with a CPG client’s catalog: we are taking a sprawling catalog of several hundred SKUs and ruthlessly pruning it down to under 50.

Variations, bundles, seasonal items, FBA and FBM - over the years this added up to become harder to actively manage and drive growth. I’ve been advocating for this project for over a year, and finally, when the brand added new product lines that have better margins and are more interesting to them, we started working through retiring some legacy and unproductive SKUs.

It has been a tangible difference already: sales are growing, despite SKUs reduction, but more importantly profitability is up 9% QoQ.

To understand why this client - and perhaps could your own business- is finding success by shrinking, we have to look at how CPG portfolio strategy has evolved since the rise of e-commerce.

The 3 phases

We have moved through three distinct phases of portfolio strategy in the last couple decades.

For a long time, the industry was dominated by the "Shelf Blockers" - giants like P&G and Kraft who used spatial warfare to starve competitors. If a rival launched a flavor, they launched five variations to physically crowd them out. Innovation was expensive and lengthy.

Then in early 2010s came the "Infinite Aisle" era, driven by the rise of DTC and Amazon. The prevailing wisdom was that the digital shelf had no limits, so the path to growth was to capture every niche preference (Chris Anderson’s concept of Long Tail) . We launched SKUs because we could, believing that a wider net always caught more fish. We saw this reach a fever pitch during the Aggregator era of 2020, boosted by pandemic-driven commerce lift.

Then in 2022-ish things started changing again. Interest rates rose, capital became expensive. Amazon became more intense operationally, with more fees granularity. Aggregators started filing banruptices. TIkTok golden rush of opportunity alleviated costs of brand marketing, but all in all, costs and channels saturation, in addition to inflation, killed the ‘growth at all costs’ model for most. This era gave us Liquid Death - a brand that so-called marketers who have never worked in rapid growth love to theorize about on LinkedIn. But I digress.

Enter Phase 3: The era we’re in today.

Profit and rationalization

“We will chip off 20% to add 20%” - said Unilever’s CEO few years ago on their ambitious goal of getting to 20% operating margin through focusing on ‘Power Brands’, and killing the rest. There is a rich irony here: the same giants that once suffocated competitors by crowding shelves with endless SKUs are now cutting them to protect their profits.

Bain & Co. coined term ‘smart complexity’ to describe the balance between having enough variety to grow, but not so much that it destroys profit.

I would call it ruthless rationalization.

Amazon is the enforcer

For years we treated Amazon as the Infinite Aisle (ex: search for something like ‘cat leggings’ brings 20 pages of results).

But Amazon has become enforcer of ruthless rationalization, simply by platform’s physics. On one hand Amazon has given so much more transparency in brand and category data, better reporting. To give brands more power and abilities to grow on Amazon. On the other hand, Amazon has effectively weaponized its fee structure to kill the "Long Tail" business model. Amazon is a commerce platform infrastructure provider. Which means it makes money on fees.

The opportunity giver, and rationalization enforcer. Both are true.

We are dealing with 3 vector complexity on Amazon. Amazon has built its ecosystem - logistics, algorithms, and advertising - to be inherently complex structure, with each piece also being complicated (The Cynefin framework explains the difference between complex and complicated). Amazon system now brings complexity tax on the "Long Tail" model across three distinct vectors:

• The operational vector - storage fees, low-inventory fees, product compliance or potential catalog issues risks. Slower moving SKUs can be a drag on the margins of the entire Amazon business.

• The algorithmic vector - we have our traditional keyword based search algorithm that, but now there is AI-driven intent based search. The AI favors products that definitively solve a specific customer problem over products that exist merely to offer variety (the 12th flavor variation). In the age of AI-assisted search, the algorithm filters out the noise. If your SKU isn't the best answer to a specific intent, it doesn't get ranked on page 50; it just ceases to participate in the conversation.

• Financial vector - a broad catalog dilutes your data density, making your ad spend mathematically less efficient than a competitor who is focusing 100% of their budget on three hero products. Plus, the need to look and analyze a lot of data points to even figure out fewer number of them that actually matter.

Volume vs. velocity 

I don’t think Amazon rewards optionality anymore. Yes, it built its Flywheel on large catalog (what can you NOT find on Amazon now?). But it doesn’t mean your catalog needs to be wide to be successful. In fact, I would argue the opposite.

Client example I started puts a definitive number of this new reality.

Saludos,

Irina

If you need help with your 2026 Amazon strategy and management, reach out for help.