How category management helps customers and retailers enjoy a smoother journey
Proven retailer benefits of category management
In today’s competitive retail landscape, retailers need to truly understand their customers shopping behaviour in order to ensure they are creating the right environment and stocking the right products in the right places. In essence category management is about giving customers a positive experience that will keep them coming back for more.
There are many elements that go to make up a great shopping experience but today I’m focusing on category management. Shopworks defines this as “an ongoing process that involves managing groups of similar products as business units called ‘categories’. By using customer information, gathered from data analysis, these categories are optimised to satisfy shopper needs and in the process, help to drive increased revenue for the retailer.”
Category management is well advanced in the FMCG world. However, retailers in other fields, particularly small to medium players, are not so familiar with this important process. And not practicing good category management can lead to a loss in sales, hamper trading relationships and potentially fail to manage risk.
The 7 step category management process.
So how do you approach category management? We liken the process to running a car; there are lots of things you need to do to ensure it continually runs smoothly; air in the tyres, fuel in the tank, a regular service etc. and we suggest a 7-step process to avoid a retailers MOT fail;
- Product categorisation: grouping the products that you sell into small groups of similar products.
- Define category roles: how important each category is to your business.
- Category optimisation: favouring your best and removing your worst performing products.
- Store clustering: grouping similar stores for more efficient logistics and a more tailored range of products.
- Space allocation: assigning the right amount of space to each product.
- Adjacencies: placing products near others that will drive spend per transaction and finally;
- Planogram: creating a visual store plan that communicates the location and amount of space given to each product in store.
Shell improve food category sales by 49.2%
We applied these steps when working with Shell to revitalise their convenience offer. Using research and data analysis, we improved their product offer and layout of their forecourt shops. This led to impressive results. Food category sales improved by 49.2%; total shop sales increased by 15.1%; while shop margins improved by 19% as customers bought more higher margin items. Shell has so far converted some 400 stores since 2012, with another 50 per year in the pipeline.
So, with the influx of customer information and of new technology it’s never been more important and easier for retailer businesses to practice good category management. Those who embrace it will reap the positive results and keep their customers happy. And don’t forget a store, like a car, topped up with the right products in the right place will lead to a smoother and happier journey for both you and your customers.
Craig Phillipson MD, Shopworks Ltd | www.shopworks.co.uk