Replace Custom Field (Pick List) from "-None-"

Replace Custom Field (Pick List) from "-None-"

I have created a custom field for a module with a Pick List of 3 items, defaulted to Item 1.
However, this does not update all existing records to have that default value.
Then I tried to use the "Replace" function to change from "-none-" to Item 1, however it gives me an error saying that "Value cannot be none". 

Can you please get the development team to fix this feature, as editing each record manually is not something I want to do.

Thank you!