Destiny - Retailer Plans and Decisions

Video  Category Management Overview.

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To attract and retain customers, retail teams must align their retailing mix to cater to their target shoppers' needs and preferences. To achieve this they need to develop strategies and processes to manage their business in a customer-centric manner.

Categories are the building blocks of a retailer’s business, in much the same way as brands are the building blocks of a manufacturer’s business. To manage their business, retailers need to manage their categories in a cohesive manner so that they are better placed to attract and retain target shoppers. This is the premise of category management.

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To effectively manage categories retail teams need to chalk out a strategy. Their business strategy is a long term course of action that they are committed to. It set’s a direction that distinguishes the retail chain from its competitors.

The strategy development process encompasses crafting the retail chain’s identity and value proposition; partitioning shoppers into segments, and identifying which target segments to pursue with what categories; and distinctly positioning the retail banner in the minds of target shoppers.

Category strategies are established to fulfil the chain’s value proposition, and clearly differentiate their banners from competition. Crafting them involves assigning category roles and establishing goals, benchmarks and objectives. ... less

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Retailers align their retailing mix to achieve their desired strategy. The retail mix is the set of tasks that are required to manage categories in the store. To achieve these tasks, retailer teams need to take the following decisions:

  • Procurement: Retailers aim to optimize inventories, eliminate stock outs, and purchase products at low prices and favourable terms. The inherent tension among these priorities, and the intricacies of demand forecasting make procurement a complicated and challenging task for retailers.
  • Merchandising: Product assortment and space allocation should blend with the category’s role, and meet the needs and preferences of target shoppers.
  • Pricing: Retail (shelf) price is a key driver for store choice and has bearing on the perception of the store. Products should be priced in accordance with the banner’s positioning, and category roles and strategies; taking financials into considerations. Low prices are a great attraction for shoppers, but they also impact heavily on profit margins.
  • Promoting: Retailers can attract and retain shoppers by offering attractive promotions that blend with their category tactics/strategies. The extent of promotions is measured in terms of promotions rating points, which in turn depend on the nature, frequency and scale of a promotion. Promotions may be funded entirely by the retailer or jointly by retailer and supplier.
  • Store Maintenance: Stores need to be well maintained so that they provide appropriate service levels and quality standards to cultivate a conducive shopping environment. Retailer teams should optimize their spend on maintenance so that they are able to achieve the desired results without adversely affecting profitability.
  • Location: The decision to open/close outlets reflects the critical trade-off between building the chain’s presence and offering shopper convenience, and the cost of doing business. It requires alignment with the retailer’s business strategy and financial goals.
  • House Brands help the retailer uniquely position its chain vis-à-vis competition. They enable the retailer to offer greater choice to shoppers, and their presence also improves the retailer’s bargaining power with manufacturers.
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