Category Managers Serve up e-Profitability

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Apr 03, 2002
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For many pure e-tailers, and even for some retailers with substantial off-line expertise, the cost of trying to provide depth of inventory, and rich and relevant on-line product information has proved insupportable. But help is at hand from category management, an established off-line strategy, according to The McKinsey Quarterly.

While off-line retailing is a mature, slow-growing business, the on-line market is expanding at double-digit rates. Moreover, customers increasingly demand an on-line presence from retailers. The search for ways to make the Web profitable is therefore on. It is a considerable challenge, calling for skills that go well beyond those required to run an off-line business successfully.

Too often, retailers offer a wide product range to increase their share of
overall customer spending without knowing enough about the non-core categories
they stock. General retailers tend to be masters at managing only three to five
core categories. When a general retailer has established a loyal base of customers
for those core products, it must determine which additional categories will
make the most of its valuable shelf space, a decision that calls for sophisticated
brand analysis and focus-group research. This is the opening for category
managers: wholesalers that develop specific expertise in managing stocks of
a given type of product for the stores they serve.

Moderator Comment: Will the outsourcing of category
management functions for e-tail become the norm for traditional retailers with
online sales operations?

This service seems tailor made for wholesalers. How long
major chains such as Wal-Mart will go with it before deciding they can do it
themselves is another question. [George
Anderson – Moderator
]

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