Category Management: Pipe Dream or Reality

Oct 21, 2002

A column on the Executive Technology web site maintains that category management has “failed to deliver on its promises”.

Cheryl Sullivan, vice president of marketing and product management for efficient market services and the author of the article says that poor implementation and monitoring are largely to fault for category management failures — problems, she believes, that can be corrected through implementation of a continuous category management process.

“Now that the business processes and technology are available to allow retailers and their trading partners to effectively access and leverage store-level demand data, category management can be taken to the next level — a level that will allow category plans to be successfully executed for optimal profitability.”

To make continuous category management a reality requires trading partners to find common ground in a number of sticky areas. These include:

  1. Collaboration. Reluctance to share data or the inability to supply it has hurt performance.

  2. Store-specific planning and execution. Lack of store-level information prevents planning. All the information in the world with store-level execution is useless.

  3. Manufacturer control. Suppliers need to have more input into store-level execution and performance assessment.

  4. POS data. Retailers need to upgrade data capture and transfer capabilities.

  5. Common standards. Information technology systems used by retailers have not worked “with the software overlays needed to deliver data to manufacturers”.

The benefits of continuous category management are profound, says Ms. Sullivan. These include (her words, our order):

  1. Understanding the “why” behind the “buy”.

  2. Less planning time.

  3. More efficient use of shelf and total store space.

  4. Reduction in inventory costs.

  5. Better allocation of trade promotional and marketing funds.

  6. Better execution of seasonal plans.

  7. More successful new product introductions.

  8. Ability to modify tactical plans.

  9. Stronger customer loyalty and confidence.

  10. Increase in “same-store” sales volumes.

  11. Higher profit margins/ROI.

Moderator’s Comment: Is continuous category management
practical in light of the hurdles that need to be overcome?

From our reading of the article, it seems that Ms. Sullivan
has put most of the onus on retailers for the lack of progress. We’re not sure
how practical it is to think that many of the obstacles that need to be overcome
ever will.

Wal-Mart is often offered up as the “ideal” of collaboration
and sharing of information between trading partners. That chain, however, dictates
the terms of all its relationships with vendors. You do it Sam’s way or you
find another retailer to sell your products.

Other manufacturer/retailer relationships are less one-sided,
however. Manufacturers are less inclined to give because these relationships
are viewed as less critical to bottom line performance. These retailers are
generally more suspicious because they “know” that Wal-Mart is getting preferential
treatment. [George
Anderson – Moderator

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