For the past twenty-five years we have watched the progressive development of what has become to be known as Category Management (CM). Fostered by visionary retail experts, who I often refer to as the Founding Fathers of Category Management, Win Weber, Dr. Brian Harris, Bill Bishop, Tom Richardson and others, Category Management has evolved from its humble beginnings of introducing retailers to a more compatible means to buy, manage, and improve their logistics and merchandising transactions with their consumer packaged goods (CPG) partners, to what it has become today, namely the essence of how food, drug and mass retailers run their businesses.
As Category Management evolved, so did the metrics by which both retailers and brands would measure success. Instead of looking just at the business in terms of total sales and profit, retailers finally had access to much of the same information that their key CPG partners used to evaluate and grow the business at the category, sub category and even brand levels. Further, linear shelf measures such as dollars and profit per foot fueled other tangential merchandising sciences, such as ‘sku’ and price optimization, all were made possible by the platform built by category management disciplines.
For Everything There is a Season, Turn, Turn, Turn
Few initiatives beyond the shopping cart itself have had such a long run in retailing as Category Management. However recent radical changes in shopper behavior are putting pressure on Category Management practices to further adapt to the new dynamics of retail. It is the shopper that has stolen the show, exploiting an array of new retail options. Consequently, physical store retailers are now vulnerable to a whole new source of ways that they can lose both shoppers and their share of wallet.
Clearly Amazon and other on-line retail players are now undeniably on the bricks and mortar store’s competitive radar. If not, they should be. Further, new smaller and more efficient physical store competitors are on the march with aggressive growth plans. So how do these new competitive dynamics affect Category Management practices? In my view, the answer to that question is three fold;
- Under the new shopper behavior paradigm complete with on-line retailing, traditional categories such as detergent, canned vegetables, pet food and the like, become increasing irrelevant to a shopper who is now focused on the specific items they buy, not the categories they reside in.
- As the bricks and mortar retailers become increasingly vulnerable to new formats, channels and customer touch points, their in-store categories must adapt to improved shopper efficiency.
- As shoppers reorganize how and where they buy varies items, retailers and brands must re-organize their categories from ‘how they are procured and merchandised’ to ‘how shoppers acquire them’.
Adaptation to Shopper Choice is Now Dictating Success
For example, from the shopper’s perspective, there are now categories and products that lend themselves to being purchased on a subscription basis, as they consumption is consistent and periodic. Conversely, there are many items that are purchased frequently for more immediate consumption, which are more likely to purchased in-store, on a fill-in shopping trip. Still other items and categories fall into a seldom-used segment, implying they may not need to be merchandised in the same way or same location in the store as more frequently purchased items.
This new ‘overlay’ of what I call ‘Shopper Choice ‘ would extend the disciplines of Category Management to include organizing and merchandising both categories and items according to how the shopper buys them, not just at their specific stores, but across all retailers (on-line and physical) that are included in the shopper’s consideration set.
As retailer’s adapt to new shopper dynamics, so too should their practices of categorization and in-store organization. Adding a new level of shopper perspective to an existing, effective Category Management platform is not only the right thing to do, but I think it would make the Founding Fathers of Category Management very proud.