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The evolution of category management and what’s next

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Category management is now 30-plus years old and it’s time to evolve. Most retailers and CPG suppliers have effectively implemented some form of category management and have for some time. Even the United States federal government finally implemented category management. However, as all things mature, change is required to keep up with the shifting shopping environment in order to continue to reap the benefits.

Category management started in the early 1990s at H-E-B in San Antonio, as a major evolution from the retailer “buying by supplier” to a focus on managing the category as an independent business unit. Category management might never have happened if it were not for the creation of the category management vision by Win Weber (Winston Weber & Associates), the significant support of Fully Clingman (former H-E-B president and chief operating officer) and the approval and support of Charles Butt. All three men are thought leaders in their own right, with the courage to implement major changes that others might shy away from. Their decision to move forward with category management had a positive impact on H-E-B and the industry for many years.

Category management clearly contributed to the growth of sales and profits at H-E-B and for the other innovative companies that implemented it. The benefits were almost immediate for the retailers who implemented it and were able to quickly leverage the advantages. Category management positioned retailers to associate merchandising strategies and tactics more closely with consumer purchase behavior, which led to an environment that encourages fact-based decision making. The CPG companies were able to better align their brand strategies and tactics with retailers, as well as improve service and inventory levels through collaborative planning. Category management was a “win-win-win” for retailers, CPG suppliers and the customers.

During the last decade, there has been a significant change in the needs and expectations of today’s shoppers. While category management provides a strong focus on the category, it does not naturally provide a consistent means of providing cross-category solutions for customers, which diminishes the shopping experience and results in missed potential sales for all. This has been compounded by enhanced competition from omnichannel retailers and “endless aisle” shopping in which the consumer has more product choices than ever.

One of the benefits of the original category management model was that it put a priority on supplier-retailer collaboration. The time has come again for retailers and manufacturers to work together to build upon traditional category management capabilities and focus on their most important asset: the shopper. This is an area that requires even further development. Retailers and suppliers must meet their customer’s needs in-store and online. The objective should be to transition to a category planning process specifically designed to convert the focus on the category to an emphasis on providing an enhanced shopping experience.

The “new” shopper is seeking solutions tailored to their lifestyles to meet their needs while ensuring it is good for the health and well-being of their family. Satisfying these needs will necessitate the collaboration of multiple departments in-store and online to deliver the solutions the shopper is looking for. Often current department silos prevent retailers from delivering complementary merchandising solutions, such as supermarkets putting protein, vegetables and a beverage offered together as a “solution.” These solutions may cross several categories and departments, so it can be logistically and managerially challenging, but the result can influence the effectiveness and ease of the shopping experience.

This “shopper-centric retailing” approach must start with a clear understanding of who the shopper is and what they really need to provide an appropriate solution. A good retailer stocks the products its customers want, but the great retailer anticipates the solution, based upon the needs of their shoppers and provides it for them as part of the shopping experience. This holds true of both in-store and online shopping, as the challenge is the same.

The key points of difference between traditional category management and the evolving mode of “shopper-centric retailing” include:

• Concentrating on total store solutions versus the narrowness of the category focus.

• Developing a singular motivation on meeting the needs and wants of the shopper.

• Shifting the collaboration between retailer and supplier to being jointly focused on actionable shopper insights resulting in total store shopper solutions.

• Sharing internal and external information and performance measures between the retailer and the supplier.

• Being well positioned to utilize digital tools as an integral part of the planning process, which includes incorporating shopper online ordering.

• Incorporating private brands more deeply as part of the overall planning process.

• Creating new methods for evaluating shoppers’ total store and online behavior.

• Coordinating omnichannel and especially store-level merchandising creativity.

Obviously, to accomplish these goals, change will be required. But for those of us who have been in retail for any length of time, the constantly changing environment is something we have embraced and find exciting. The world of retail would be eventually become boring if everything stayed the same.

In 2022, the solution is shopper-centric retailing. As a result of the pandemic and changes in customer behavior, it is the answer to supporting the continued growth of sales and profits. In March, MMR will be moderating a panel discussion to discuss the new shopper centric retailing model with retailers and CPG representatives. This definitely should be of interest to both innovative retailers and CPG suppliers. It’s exciting to consider this evolution from category management to the potential of what shopper-centric retailing will bring to our industry. Similarly to the original implementation of category management in 1990, the first companies to make the necessary changes and those who do it the best will continue to grow by delivering customer satisfaction for years to come.

Victor Alessandro is president and chief executive officer of RCVA Group International.


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