Category Management

Posted On Oct 24, 2020

Definition and Examples for Retail Professionals

•Category management is a retailing and purchasing concept in which the range of products purchased by a business organization or sold by a retailer is broken down into discrete groups of similar or related products; these groups are known as product categories (examples of grocery categories might be: tinned fish, washing detergent, toothpastes). It is a systematic, disciplined approach to managing a product category as a strategic business unit. The phrase "category management" was coined by Brian F. Harris.

•Category Management is both the art and the science of getting your products in the hands of new and loyal shoppers.  It includes optimized distribution, effective merchandising, efficient trade marketing, maximizing consumer/shopper engagement, and actionable insights. Category Management is the great equalizer between young brands and their most sophisticated competitors. 

•Category Management is to improve the customer experience, drive efficiencies for businesses, and deliver quality products and services that generate profits. As we all know, this isn’t as simple as it sounds.

Category Management Definition

Category management is the process of bundling like products into a singular category, or business unit, and then addressing procurement, merchandising, sales, and other retail efforts on the category as a whole.

A central idea behind this strategy is to emphasize the benefits of the category for the consumer and remove inefficiencies and unprofitable competition among brands and suppliers within a category. For instance, this approach can help retailers lift profits on similar products in multiple ways, including by organizing procurement efforts under a single category instead of by individual brand or supplier.

Category Management Examples

What does category management look like in real life? This concept gives category managers multiple options to solve retail challenges.

For starters, an organization can procure goods on a category level, not a product, brand, or store level. This can centralize procurement under one person or team. That can simplify negotiations with suppliers and save the business time and money.

Category management can also be used to improve the customer experience. In grocery, for example, most stores are organized by category (dairy, produce, meat, and more) which makes it easy to navigate stores and find specific products. Furthermore, management can make changes at the category-level. They can launch new promotions, planograms, and much more across a single business unit.

There are various ways that category management can address and improve the shopping experience. A few of these include

- Competitive pricing;
- Attractive promotions;
- Relevant assortments; and
- Appealing visual merchandising

All of above aspects lead to better customer value propositions. That said, it is important to highlight that category management should be a collaborative approach between retailers, suppliers and consumers. In truth, a big part of category management is aimed at the relationship between retailer and supplier.

How can category management meet the needs of the various role players?

1. The omnichannel environment
The retail space has changed dramatically in the last few years. Currently, the retail environment consists of three distinct elements: the so-called click (online), brick (physical store) and mobile (mobile devices).
As more and more consumers move to online platforms, it is critical that the in-store experience is as optimal as can be. Here category management can facilitate the shopping experience by optimizing the store format and increasing the appeal of product display by making use of planograms and other tools.
Moreover, with the move to online shopping, the consumer expects greater efficiency and immediate availability of products. As a result, it is highly important that stock in store is up to date with current demand and that retailers can efficiently anticipate consumers' needs.

2. Consumer personalization
Our current culture expects personalization and emphasizes fostering of the individual. Shoppers expect a personalized in-store experience. Here assortment planning is of the utmost importance. With relevant data insight, category management can optimally manage assortment decisions and ensure that product categories are targeted as best possible to local and individual tastes and needs.

3. E-influence
Social media has greatly influenced the retail sphere. While consumers still enjoy going to physical stores to buy products, price comparison and reviews are conducted online and influence consumers' decision to a large extent. Category management can hone in on the critical stage of buying, i.e. that of gathering relevant product information and making the ultimate buying decision. Intelligently targeted promotions and social media influence from suppliers and retailers can gain positively influence in-store buying decisions.