Bernhardt van der Merwe, head of Category Management at DataOrbis

By Bernhardt van der Merwe, head of Category Management at DataOrbis

Retail is a vibrant and highly competitive sector in which small businesses often contend with challenges around the implementation of effective category management strategies. This is often attributed to SMEs limited access to detailed data.

By developing your understanding of the core principles of category management – you can adapt them to your unique circumstances. Moreover, arming yourself with knowledge can assist you in making better, informed decisions that drive sales and enhance customer satisfaction.

Unpacking category management

It is a strategic approach to retail business management that focuses on product categories as individual business units. It involves managing product categories to maximise sales and profit which in turn can require detailed data analysis.

However, small retailers might not have access to granular data. This is where it is important to note that limited data does not translate to ‘no data’ – there are ways in which you can leverage what you have to assist you in making informed decisions.

Let’s commence with what is possibly the most important data – sales and how to make the most of it. Never forget that even the most basic sales data can be a veritable information goldmine. Start with the data you have, even if it’s very basic – by combining it with the right strategies you can still effectively manage your categories.

The following are my recommendations for strategies you can deploy to unlock the value of category management in your business:

* Start by listening to your customers – direct customer feedback can be incredibly insightful. You need to encourage customers – possibly even incentivise them in some small way through a competition etc., or potential discount off their next shopping basket.

Basically, devise ways to encourage them to share their thoughts through feedback forms, surveys, even casual conversations.

The trick is to pay close attention to their preferences, complaints, and suggestions. Throughout my career, I have conducted numerous such exercises in person. The information gathered, albeit informally, has often been sufficient to enhance sales performance when applied effectively.

While not diminishing the value of formal research, I have come to believe that informal customer feedback is an essential starting point for investigating ways to improve the point of sale.

* Next, listen to your staff – they are a valuable source of information and are also your good will ambassadors. You must motivate them by encouraging them to reveal their observations and insights. Merchandisers, for example spend most of their time in front of shelves unpacking and rearranging products. In this way they have a direct view of how shoppers buy, what they are looking for, and what frustrates them.

* Build supplier relationships – developing strong partnerships with suppliers is key to opening the door to valuable information as suppliers have access to the broader market and shopper insights. They can provide invaluable data on product trends, shopper preferences, and industry benchmarks.
Customer insights can inform how products should be grouped and sequenced to enhance on-shelf visibility, thereby addressing complete solution offerings or fulfilling specific needs. By strategically grouping products on the shelf, retailers can potentially encourage customers to purchase more items or opt for higher-value products, effectively increasing the total value of each sale.

* Inventory turnover analysis – investigating how quickly items are sold and restocked can offer insights into the performance of specific items. Top product sellers are usually your best performers, typically requiring more frequent replenishment – such items can benefit from increased shelf space.
Such analysis can guide your stocking decisions while also providing perspective on how poorly performing products, with extensive shelf space, are appropriating both space and visibility to the detriment of better performing items. This can result in revenue being tied up on the shelf, high replenishment rates, frequent out-of-stock situations, and often an overstocked back room.

* Technology tools for small retailers – are available. Your budget may not stretch to sophisticated category management software but basic analytics tools are readily available and user-friendly. Such tools can assist you to track sales, monitor inventory levels, and analyse customer buying patterns.
A good example is Excel – a spreadsheet programme from Microsoft and a component of its Office product group for business applications. Microsoft Excel enables users to format, organise and calculate data in a spreadsheet.

By organising data using software like Excel, data analysts and other users can make information easier to view as data is added or changed. It is widely accessible and user-friendly and can be used for basic analytics. Many businesses, especially smaller ones, use Excel as a cost-effective tool for these purposes, making it a practical choice when more sophisticated category management software is not within their budget or capabilities.

Test and learn

The question to ask now is how do you get the ball rolling? I advise you to commence by focusing on modifying the changes that are likely to yield the most promising results. Start with small changes in your product range and merchandising strategies – then scrutinise the results. You’ll need to work out whether the methodology you used to effect the changes can also serve as best practice.

If the answer is ‘yes’, then you can go ahead and apply to similar categories. Because it’s crucial that you remain informed about technology and general trends in your sector you will need to factor in an investment in more advanced data collection and analysis. But this is less daunting than you think because you can fund it from the inevitable growth your business will enjoy from a continuous refinement of your approach to category management.

So, to reiterate, the implementation of category management in a low data environment is not without its challenges but it’s important to understand it can be done and in doing it you can unlock a treasure trove of business benefits. You know the old phrase, ‘from little acorns mighty oaks grow’, my advice is to be strategic in your thinking and start small, incrementally building over time.

The rewards of this approach are proven to be immense and include enhanced business performance due to better decision-making.

Source: BIZCommunity

Bernhardt van der Merwe, head of Category Management at DataOrbis

By Bernhardt van der Merwe, head of Category Management at DataOrbis.

Mastering Category Management (CM) is described as critical to retailer growth as it addresses the three most important trends of the millennium:

* The ever increasing power of retailers who focus on growing categories instead of brands.

* The digital empowerment of shoppers who need satisfaction at the category level.

* ‘Big data’s’ propensity to yield its most valuable insights at the category level.

CM requires a close partnership between supplier and retailer – this lays the foundation for joint success. It not only makes product category decisions more straightforward but also improves the shopping experience.

Let’s take a look at how CM is successfully implemented and detail the necessary preparations, evaluate current practices, envision desired outcomes, and discuss practical steps for building an effective system.

Goals and objectives

The goal of CM in retail is to match product offerings and merchandising principles with evolving consumer preferences thereby driving growth and competitive edge. This involves defining a strategic vision for each category that meets broader retail objectives and ensures customer satisfaction.

A deep understanding of market trends and consumer behaviour is crucial, and this can be augmented by data analytics to predict future needs.

Collaborating with suppliers enhances this vision and fosters joint commitment to supply chain efficiency and market growth. It is important to understand that objectives should be strategic, measurable, and flexible, focusing on immediate improvements and long-term growth.

A dynamic, responsive CM system allows retailers to quickly adapt in a rapidly changing retail landscape. Anticipation of consumer demand trends and being prepared to meet those requirements is essential if retailers are to seize emerging market opportunities.

Implementing Category Management

Let’s unpack how you go about implementing CM.

Successful CM deployment starts with a thorough assessment that aims to evaluate your organisation’s readiness for change. This involves understanding current workflow efficiencies, retailer-supplier collaboration potential, and staff skills while setting a clear baseline for improvement.

In tandem, it is necessary to assess current category performance against industry standards and consumer expectations – this will provide a clear picture of where you stand.

This dual assessment guides strategic planning, focusing on areas ripe for growth and efficiency. Suppliers can contribute valuable insights into consumer trends and product performance, enhancing these evaluations.

With this solid base of knowledge, retailers can create a focused CM plan that’s well-aligned with organisational capabilities and market realities.

Effective CM deployment hinges on three key pillars, namely: processes, structure, and systems.

* Processes involve workflows, including assortment planning, pricing, promotions, planograms and supply chain efficiency. Integrating suppliers into these processes helps with aligning strategies and smooth information flow.

* Structure relates to the organisational setup and distribution of roles, crucial for clear responsibilities and accountability in managing categories. A collaborative structure encourages joint decisions and strategy formulation with suppliers.

* Systems form the technological backbone, enabling data analysis and communication. Advanced systems facilitate data integration, providing access to timely, relevant information.

These pillars are interdependent. Effective processes require the right structure, and both are supported by agile, data-driven systems. Their design should be strategic, integrating suppliers, adaptable to market change and resilient against external pressures. A comprehensive framework ensures a responsive CM strategy.

Rolling out CM strategies for effective change

The next big challenge involves managing the complex and often rocky road to change. Change management is crucial to the successful implementation of CM. The starting point must be a succinct communication explaining the rationale behind change initiatives plus the benefits.

This approach ensures everyone understands the potential impact of the change programme. Training is vital to acquiring staff buy-in to change plans and helping them to adapt to new methodologies and tools.

Leadership should lead by example and support the transition, while also encouraging feedback from those affected to address concerns and gather ideas. Managing expectations is important for maintaining morale during challenging times.

This approach cultivates a culture that not only embraces continuous improvement but actively seeks it. As retailers roll out new CM strategies, it’s essential to adapt supplier relationships accordingly. Maintaining open communication, cooperation, and supplier involvement in the change, where practical, will lead to success.

Turning your CM strategy into a reality

Now it’s time to take your plan and make it a reality. Turning a CM strategy into reality requires a clear roadmap that outlines each step from launch to full execution while tracking progress through identified milestones. Early detection of quick wins is essential to building confidence and exposing the plan’s value.

Allocation of the right resources – time, budget, and personnel, is crucial to the avoidance of implementation bottlenecks.

Continuous monitoring enables timely adjustments, keeping the deployment on course. Clear success metrics should be established from the outset. These should define what success looks like at each stage. Scalability is also key, ensuring the system can evolve with the business.

Involving suppliers in this phase is critical. They contribute to the design and testing of pilot programmes; they offer feedback and provide insights that help refine category initiatives.

Meeting consumers’ needs

In a nutshell, CM deployment is a strategic process that reshapes how retailers meet consumer needs. It requires a systematic approach from initial assessment to final implementation. As retail evolves, so must CM strategies. The journey, while challenging, promises improved efficiencies, customer satisfaction, and financial gains.

Continuous improvement is key, with retailers needing to constantly refine their market strategies if they are to remain competitive and in touch with consumer preferences.

Finally, the partnership between suppliers and retailers isn’t just a one-time effort, it’s a continuous process of adaptation and growth, critical for the long-term CM success.

Source: BIZCommunity | SuperMarket & Retailer