BJ's Wholesale Club will cut SKUs by 20% over the next couple of years, reducing the average store from 7,500 items to around 6,000.

CEO Robert Eddy admitted on a recent earnings call that the company had become "over SKUed." "What we're doing now is removing unnecessary choice," Eddy told shareholders.

For comparison, Costco carries around 4,000 SKUs per store.

The move marks a sharp turn toward the founding logic of the warehouse club model, where customers pay a membership fee in exchange for a limited selection of bulk goods at wholesale prices. Not every major warehouse retailer has held to that philosophy.

Past attempts to slim the assortment backfired, Eddy acknowledged. Removing SKUs simply reduced sales, and BJ's ended up adding items back — a lose-lose outcome. Whether the new plan helps or hurts the bottom line will depend heavily on which items get cut.

How BJ's got overstuffed

Dinesh K. Gauri, professor of marketing at University at Buffalo's School of Management, told Retail Brew that retailers face a strong temptation to keep adding new products.

"I think most companies fall into this trap," Gauri said. "You want to provide as much choice as possible to the consumer. But at some point, it's too much, and then what's the difference between a club store and a normal supermarket?"

The core advantage of the membership model, Gauri added, is reducing choice in exchange for the "best possible value."

Scott Benedict, a retail consultant specializing in warehouse stores and a former buyer for Sam's Club, told Retail Brew that BJ's SKU count reflects both a lack of discipline and an attempt to outdo competitors with a broader assortment, especially in grocery and consumables.

On the latest earnings call, Eddy identified beverages as a category where cuts have already helped, including removing "unnecessary duplication" such as one-liter and two-liter sizes of the same product.

BJ's did not respond to multiple requests for comment.

The risk of cutting the wrong product

The danger of aggressive SKU rationalization is removing the exact item that keeps a customer coming back, Gauri said.

"They will have to go at it very surgically," Gauri said. "They cannot just say, 'OK, these 20% of items are selling less. I'm going to just reduce them.'"

Benedict agreed that every choice counts in the process. "Any one of those decisions that's bad can lose you a member," he said.

BJ's also needs to hold the line once the cuts are made to capture any benefit, Benedict added. The worst-case scenario: the reductions scare off customers without driving enough volume in the remaining SKUs.

"In a club format, you're not paid to provide every choice in a category," Benedict said. "You're paid to make the best choices, and if your member doesn't see it that way, then you have a problem."

With roughly 1,500 items per store hanging in the balance, the execution of the cull — not the size of it — will decide whether BJ's finally breaks its lose-lose cycle on assortment.