Category Management in Indian Retail

Group - 6
Mohan sornapudi 76 Mohit Talwar 77 Mullai Selvan 78 Munish Gupta 79 Naresh Jawni 80 Navdeep Budhiraja 81 Naveen Kumar 82 Neha Aggarwal 83 Neha Sheth 84 Neha Singh 85

Submitted on 27th July 2012

The World of Category Management

Category management has been described as one of the most scientific approaches to decision-making in retailing because of its reliance on data. Whenever the retailer striving to bring greater focus to the store and improve its management and measurement processes, category management is most often the answer. Grocery retailers across the world were the earliest to adopt it, but over the last few years retailers in all categories have looked at it as a tool for seeking sustainable competitive differentiation and advantage.

Objective of Category Management

Objective of the Category Management process Instigate or enrich their category management thinking Become more consumer focused

Effectively incorporate the Best Practices into their daily business processes

Category Management Defined as ..

Category
Category is a distinct, manageable group of products/services that consumers perceive to be interrelated and/or substitutable in meeting a consumer's needs

Category Management
Category Management is a retailer/supplier process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer value.

Category Analysis
Sleepers
Identify key products within category Delist slow movers and marginal products Give quick movers more shelf space Optimize margin mix and DPP

Winners
Continue current policies Be alert to adoption of new products Minimize operational problems like Out of Stock Optimize margin mix and DPP

Market Share

Questionable

Category Analysis

Opportunities

Limit Product mix to core assortment and delist marginal products Look for price raises Minimize shelf space at category level Transfer operational and Operational work to third parties

Harmonize product mix with market trends Improve prize image via low prices for key products Maximize shelf space at category level Give promotional support to key item.

Market Growth

Category Management As a Process

Step 1: Define Category
The retailer assigns products to various categories based on factors such as consumer usage and packaging. So while one possible category definition could be soft drinks, another definition could be soft drinks in cartons. (Most often, though, this will be a subcategory)

Category Management As a Process

Step 2: Category Role: a. Destination categories: Are b. Routine category: Are those that the
consumer purchases as matter of routine those that the retailer uses to help define itself as the store of choice to the consumers by and would include things such as toothpaste, toilet soap and soon. simply offering better value to the consumer.

Category Management As a Process

c. Convenience categories: Consumer finds convenient to pick up at a neighborhood retailer. Stationery products would be a good example. d. Seasonal /Occasional categories: Are those that are purchased infrequently or follow cyclical patterns.

Step 3: Access Performance

Access the performance of current situation.

Step 4: Scorecard
Is used to establish the baseline and the targets for measuring category performance.
The category role matrix is used here along with other parameters such as sales volume and all-time favorite GMROI (Gross Margin Return on Investment).

Category Management As a Process

Step 5: Category strategies:
Involves the development of marketing strategies for the category. Category marketing strategies can be classified into the demand-chain and supply-chain strategies.

Step 6: Category tactics:

This is to determine the assortment, pricing, promotion, shelving and supply-chain tactics required to ensure that the strategies work.

Step 8: Review:
This phase involves monitoring the category and taking any action required to ensure that the category management process delivers maximum value.

Step 7: Implementation:
Store level execution of the category management process is perhaps the most vital link in the entire chain.

Other Crucial Elements

Partnership: Perhaps the most crucial element for the success of category management is the partnership between the retailer and supplier. A partnership that focuses on the consumer and providing her with value. In order to make this happen, the measures outlined below may be of some use:
Agree on just how the partnership is supposed to work, including details of the level and degree of the relationship Establish a match between the strategies of the retailer and the manufacturer Set priorities for the category Create a mechanism for measurement and monitoring.

Other Crucial Elements

A Category Captain

The category captain is a supplier who will form an alliance with the retailer to enable the latter to develop consumer insight, satisfy consumers and improve performance and profit across the entire category. For instance, the FoodWorld chain of food and grocery stores is working on a joint category management programme with some manufacturers. The bottomline in such an arrangement is that the category captain must have an understanding of the core consumers for the category as well as an understanding of the core consumers for the retailer.

Getting the optimum data mix

It is important, when gathering data, to ensure a good mix is used in order to establish a balanced and complete view. Both retailers and suppliers viewed Range Performance as the most important information. Retailers focus continues to be on range with Range Gap Analysis stated as the second most important data type, whilst suppliers focus is on Shopper Insight & Missions.
Market

What is happening in the market? e.g. - Environmental trends may affect packaging. - Health focus may affect product ranges and demand

Retailer

What do you need to know about the retailer? e.g. - Share of category versus competitors, - Retailer strategy, - Customer profile

Supplier

What do you need to consider? What is the company strategy? What are they trying to do with their brands? What supply challenges are they facing? Who are they? How do they differ from the national average? How do they view the category? What drives their behavior?

Shopper/ Consumer

Four key phases : Day-to-Day Category Management process

An Indian Scenario
For Indian retailers, strategic category management is key to reducing costs, increasing ales and improving profit margins- all while keeping customers happy By replacing subjective decision making data-driven analysis, category managers can make better product decisions that lead to better results and more satisfied customers. Sound category management combines the rigor of science and analysis with the dynamic world of retail. The sooner Category mangers use prove processes and data driven analytics rather than trust their gut feeling or rely on purely experimental decision-making, the sooner profits will rise.
Focus on : Customers, Roles, competitors and performance

Improving Category Mgmt An Indian Scenario

Four Golden Guiding Principles For Indian Retailers
To ensure top-and bottom-line improvements while keeping customers happy. Take a customer focus : Sales is often the only indicator Indian retailer use to measure their performance and identify where to improve, where to improve or availability Adopting consumer information, which can come through primary research, suppliers and point-of-sales data Define Category Roles: The four key categories that dictate what products to offer customers and the best format: Destination: Products that draw in customers and drive perception Preferred : Products that move profits and the bulk of sales Occasional : Products that are needed, but not every day Convenience: Impulse purchase and add-on-sales Understanding these different categories and roles they play allow category managers to make more tactical decisions about assortment, price, placement and promotions

Watch the competitors and suppliers: Retailers need to track all competition closely, especially within destination categories, as these products should never be priced above competitors
Strengthen operations and performance: For many Indian retailers, the best category strategies often remain on paper, as roles between category teams and store operations are never clarified.

Drawbacks Of Category Management

Full-scale adoption requires considerable amount of reorganization
Skills shortages Difficulty in accepting suppliers as allies Reluctance to change inappropriate organizational structures Lack of clear strategic plans Lack of variety offered to customers

Threat to smaller suppliers

Conclusion Despite the fact that category management in India is still at a nascent stage, most retailers are rather clear that it will gain in importance over the next few years. For one, it will evolve into an essential component of business planning by virtually all retailers. It will also be driven by better partnerships between retailer and suppliers. And finally, there will be greater focus on the consumer

References
When Business Becomes a science Business line January 2002 http://en.wikipedia.org/wiki/Category_management Foodserviceindustrynews.com http://www.ups-scs.com/solutions/white_papers/wp_category_mgt.pdf http://avail.com/wp-content/uploads/WhitePaper_BehavioralCatMgt.pdf The Essential Guide to Day to Day Category Management Publication Date: 2000 ;ECR Europe Author: Luc Demeulenaer, Grant Withe, Hubert Weber, Michel Joannic, Chris Turner White paper published by Brian Harris, Ph.D.Founder and Co-Chairman, The Partnering Group