Category management: It’s a phrase that trips off the tongue and has spawned millions of column inches in business magazines and internal communications since it became so fashionable back in the 90s.
Yet it’s still, to some, a controversial subject that both wholesalers and their suppliers have yet to always agree on.
Retail management consultants, Retail Vision, led by John Ibbotson, whose expertise lies in both the retail and wholesale trade, defines category management as “managing product categories as business units to satisfy customers need”. In a nutshell that means “find out what the customers want and give it to them.”
It sounds easy and for multiples such as Tesco, Sainsbury’s or Asda running hundreds of stores carrying thousands of SKUs, it probably really is as simple as stocking the top 10 best sellers in each category – and little else.
But wholesalers see things differently. Steve Parfett, chairman of Stockport-based AG Parfett amp; Sons says his company tends to work with the big suppliers over several months when they use Epos data to analyse sales to create bespoke category advice. But he warns that wholesalers, unlike the supermarkets, are not in a position to only offer a narrow product range. “We don’t want to have stock sitting on our shelves that isn’t going to sell, but equally it’s our responsibility to stock some products that might only sell 20 a week because it’s something our customers want.”
His comments are backed by Parfetts’ trading director Greg Suszczenia who says: “Breadth of range is very important due to the many types of customers we deal with, from farm shops to market traders. Obviously we are very interested in influencing category best practice for traditional high street outlets, but we have to be mindful to create points of difference over symbol groups. For instance, an independent retailer could make themselves `famous` for stocking a wide range of ales, this would obviously not sit in any planograms or category advice.”
But Suszczenia says some suppliers still don’t understand why it’s important for depots to stock as wide a range as possible.
“Suppliers will advise slimming down ranges to best sellers but often this reduces the opportunity for category development or competitors entering the market. This is where a buyer has a lot of responsibility to take sensible advice while trying to see genuine, fresh and long lasting developments. Recent examples could be the growth of flavoured ciders or the resurgence of own label in the face of economic hardship.
Dharam Bhamra heads up buying at Wanis cash and carry that specialises in Afro-Caribbean food in Leyton, East London. He says: “Category knowledge is very useful to us and we expect leading suppliers to provide us with the market trends and their marketing plans.”
He adds: “Category insight involves understanding past, present, and future forecast of category performance in line with macro and micro economic factors but the advice from suppliers is mostly more based on their future forecast then on the present performance, which makes it difficult for wholesalers to implement. Because we deal with retailers and not consumers it’s very difficult for us to change or influence retailers’ set mentality.”
And Bhamra says not all suppliers really understand the issues faced by cash and carry operators. He gives one example of a major supplier, who proposed that all their products were kept together because of the brand’s category dominance. “But the fact was not all SKUs in their portfolio were market leaders and hence we rejected it.”
CATEGORY CORE PRINCIPLES
For wholesalers with retail clubs the advice from the big suppliers can be priceless.
Stuart Johnson is retail controller at Landmark Wholesale in charge of the Lifestyle Express stores. He says: “We work with 55 key suppliers at category level and they all contribute to an annual process that defines the planograms book for our retailers. They also help us to define our core range of 860 bestselling products.”
He says that range is not always easy to arrive as because of regional differences across the categories, but suppliers offer invaluable help in narrowing it down. Once the core products are defined for retailers, the list is also fed to Landmark member wholesalers, so they can ensure they’re not missing any vital products from their stock lists.
Adds Johnson: “Some suppliers are more impartial than others and rather than taking a category approach push their own brands, but there are certain suppliers we know and trust and they are the ones we work most closely with.”
TAKE A VIEW
John Ibbotson, co-founder of retail management consultancy Retail Vision, says the main issue faced by wholesalers is the lack of independent advice across all the main elements of best practice: From customer information and behaviour to positioning in the depot, the number of SKUs and range selection.
He says wholesalers must work through the category management process in more detail in the depot and once they understand the retailer and what he wants they should construct a product display based on their customers’ decision-making hierarchy. “The display must be based on what the customer wants. That is what actually sells. It’s no use having a profitable range if no one buys it.”
John Ibbotson’s top five questions you should ask your supplier when planning your category
1 Will you grow my category sales, not just your products, and by how much?
2 How much space should I give to the category?
3 What is the category segmentation based on my customer needs?
4 What is the range for each segment?
5 What is the best category display and can you give me a planogram?