Category Management approach usually applied in a trade chain

1. Category Management
Category Management approach usually applied in a trade chain

2. What is Category Management?
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. It is a
systematic, disciplined approach to managing a product
category as a strategic business unit.
Brian F.Harris

3. Why?
1970
• Small stores
• Less than 400 feet squares
• 200/300 SKUs
• Growing consumption
• Unstructured chains
2015
• Multi format stores
• More than 30.000 feet squares
• More than 20.000 SKUs
• Oversupply
• High competitiveness

4. So..
• In a competitive business just organized and proficient
chains will stay on the market.
• A huge complexity behind the workflows impose to
approach the business considering each category as a
single business, in order to decrease the whole
complexity.
• So it's important ensure a managing system for each
category through strategies of pricing, promotion,
assortment and exposure aiming achieve results of
sales and margins.

5. Steps:
Definition
Role
Evaluation
Targets
Strategies
Actions
Assign a specific role for each category, considering our customers
needs and behaviours.
Evaluate gap and opportunities for our categories compared with the
market
Set a clear and achievable target for each category in terms of sales
and margins, considering market trends.
Set strategies of Assortment, Price, Promotion and Visual
Merchandising in order to achieve sales and margins targets
Apply strategies and processes.
Ensure a correct execution for each strategy and a total engagement
of every department in the processes.
Execution
CategoryFlow
Define segmentation and products for each category.

6. Definition
Departement
Family Family Family
Category Category Category
Segment Segment Segment Segment
Brand
Formati
Referenze
Brand
Size
SKUs
Definition
Role
Evaluation
Targets
Strategies
Actions
Execution
CategoryFlow

7. Definition:
Departement Families Categories
Alcoholics Spirits Flavoured Spirits
Brandy
Vodka
Whisky
Rum
Gin / Genever
Tequila
Wine Still Light Wine
Sparkling Wine
Fortified Wine
Light Aperitifs
Other Wines
Beer Alcoholic Beers
Non-alcoholic Beers
Cider
Segment
Canadian Whisky
Irish Whiskey
Other Whisky
Scotch Whisky
US Whiskey

8. Definition:
WINE
STILL SPARKLING FORTIFIED
RED WHITE
Light Grapefruit
Floral
Light Herbal
Grassy
Rich Creamy
Nutty
Vermentino
Verdicchio
Greco di Tufo
Pinot Blanc
…
Sauvignon Blanc
Verdejo
Gruner Veltliner
Chevemy
…
Chardonnay
Soave
Cote de Beau
Macconais
…
Light Citrus
Lemon
Pinot Grigio
Garganega
Fiano
Silvaner
…
Medium
Perfum Floral
Tokaji
Viognier
Roussanne
Marsanne
…

9. Definition:
EAN code is a European Barcode (UPC in USA)
Is printed over the products and is read by POS.
May be 13 or 8 digits

10. Definition:
So, the first step is to understand characteristics
and values of the Category focusing our
attention in each segment, in order to define
specific strategies for similar groups of products.

11. Role:
Profit contribution
(Margins,Contribution)
Loyalty Driver
(Frequency, Sensibility
of consumers)
Caffè
Te
Biscotti
Succhi
di frutta
Pasta
Verdura
Surgelata
Birra
Pesce
Surgelato
Gelati
Dolci
Routine Destination
Convenience Occasional
Definition
Role
Evaluation
Targets
Strategies
Actions
Execution
CategoryFlow

12. Role:
The Role of categories is set considering:
- the importance for the customer (frequency,
sales, price sensibility)
- trade interests (margin, profit, contribution)
The role may be customized for:
- area
- store format
- seasonality

13. Role:
Cookies
Sugar
Wine
Pasta Milk
Salt
Omogen
Aperitifs
Mozzarelle
Yougurt
Water
Beers
Oil
Tomatoes sauce
Champagne
Coffee
Bread
Loyalty Driver
(Frequency, Sensibility
Of consumers)
Profit contribution
(Margins,Contribution)

14. Role:
Routine
• Daily needs
• Store Traffic
generator
• Price Competition
Destination
• Loyalty and sales
• Need for
differentiation
• Competitive
advantage
Convenience
• Occasional needs
• Niches
• Service for
consumers
Occasional
• Emotional
purchasing
• New markets
• Customer
Satisfaction
Loyalty Driver
(Frequency, Sensibility)
Profit contribution
(Margins,Contribution)

15. Evaluation:
Fair Share
Sales
Market share
Definition
Role
Evaluation
Targets
Strategies
Actions
Execution
CategoryFlow

16. Evaluation:
Comparing internal and external data it is possible
to find points of strength and points of weakness:
- Market Share for each category (Fair Share);
- Market Share for leader brands;
- Market Share for private labels;
- Frequency and Sales in cut prices;
- Number of SKUs in each Category;
- Price Average;
- Margins;
- SKUs opportunities in the market;

17. Targets:
Category
Segment
Category
Segment
Category
Segment
+ 5%
+ 11% + 6% + 3%
+ 11% + 6% + 3%+ + = + 5%
Targets Tree
Definition
Role
Evaluation
Targets
Strategies
Actions
Execution
CategoryFlow

18. Targets:
We have to set targets in terms of gross margin (sales
x margin%). Managing the sales mix is the best way to
achieve our targets. So we need to influence the sales
of every brand.

19. Strategies:
TRAFFIC
FREQUENCY
PROFIT
PRICES
ENTHUSIASM
Strategies for increase the number of
customers in the category
Increase the number and the ammount
of purchasing for each customer
Keep a good profitability, through
discounts and contribution
Increase net turnover through a bigger
share of premium products.
Get more loyalty dispensing
informations, tips, interactions
Definition
Role
Evaluation
Targets
Strategies
Actions
Execution
CategoryFlow

20. Strategies:
Every strategy should be declined in 4 kind of actions:
Assortment, Price, Promotion, Exposure.
Depending of the role we can identify:
Price: Medium competitiveness Price: High competitiveness
compared with compared with all the competitors
main competitors
Promotion focus on cut prices Promotion deep cut prices
Exposure spaces in line with sales. Exposure overdimension the spaces.
focus on margins. focus on the niches.
best areas.
Assortment number of products in line with the Assortment Number of products higher
market. specific role for cheaper than the market.
products and private labels. Many premium brands and
exclusive ones.
Price: Less competitive than Price: Medium competitiveness
main competitors
Promotion No promotions Promotion few promotions
good margin
Exposure Worst store areas Exposure correctly dimension the spaces.
good areas.
Assortment narrow assortment Assortment narrow assortment
no private label private label in core segments
no premium prices deep of premium prices
Routine
Destination
Convenience
Occasional

21. Strategies:
Every strategy aims to decrease market share of
unprofitable brands, improving share of profitable ones.
How? Defining promotions, prices, and exposures in
order to influence the consumer choice.

22. Actions:
Number of products,
Wideness of category,
Deepness of category
mechanics,
frequency,
deepness
high competitiveness,
medium competitiveness,
low competitiveness
Category Plan
Definition
Role
Evaluation
Targets
Strategies
Actions
Execution
CategoryFlow
Shelf
Extra Shelf
Promotional

23. Actions
Reviewed each 6 months allow you to drive
seasonality and change of consumption
Planned every year have a great impact on sales,
so is very important in negotiation
Every week we need to change our competitive
positioning, comparing our price with the main
competitors
After every Category Review (every 6
months) we need to set new exposures,
both for shelf and extra-shelf.
Frequency of actions:

24. Execution
Category Review
Test
Roll-out
Monitoring
Definition
Role
Evaluation
Targets
Strategies
Actions
Execution
CategoryFlow

25. Category Management
Fabio.Bullita@yahoo.it