Mohan sornapudi 76 Mohit Talwar 77 Mullai Selvan 78 Munish Gupta 79 Naresh Jawni 80 Navdeep Budhiraja 81 Naveen Kumar 82 Neha Aggarwal 83 Neha Sheth 84 Neha Singh 85

Category Management in Indian Retail

Group - 6

Submitted on27th July 2012

• Category management has been described as one of the most scientific approaches to decision-making in retailing because of its reliance on data.

• Whenever the retailer striving to bring greater focus to the store and improve its management and measurement processes, category management is most often the answer.

• Grocery retailers across the world were the earliest to adopt it, but over the last few years retailers in all categories have looked at it as a tool for seeking sustainable competitive differentiation and advantage.

The World of Category Management

• Objective of the Category Management process

• Instigate or enrich their category management thinking

• Become more consumer focused

• Effectively incorporate the Best Practices into their daily business processes

Objective of Category Management

Category Management Defined as ..

Category

Category Management

Category is a distinct, manageable group of products/services that consumers perceive to be interrelated and/or substitutable in meeting a consumer's needs

Category Management is a retailer/supplier process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer value.

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Limit Product mix to core assortment and delist marginal productsLook for price raisesMinimize shelf space at category levelTransfer operational and Operational work to third parties

Harmonize product mix with market trendsImprove prize image via low prices for key productsMaximize shelf space at category levelGive promotional support to key item.

Category Analysis

Category Analysis

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Questionable Opportunities

Market Growth

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Category Management As a ProcessStep 1: Define Category

The retailer assigns products to various categories based on factors such as consumer usage and packaging. So while one possible category definition could be soft drinks, another definition could be soft drinks in cartons. (Most often, though, this will be a sub-category)

Step 2: Category Role:

a. Destination categories: Arethose that the retailer uses to help define itself as the store of choice to the consumers by simply offering better value to the consumer.

Category Management As a Process

b. Routine category: Are those that the consumer purchases as matter of routine and would include things such as toothpaste, toilet soap and soon.

c. Convenience categories: Consumer finds convenient to pick up at a neighborhood retailer.Stationery products would be a good example.

d. Seasonal /Occasional categories:Are those that are purchased infrequently or follow cyclical patterns.

Step 3: Access PerformanceAccess the performance of current situation.

Step 4: Scorecard

Is used to establish the baseline and the targets for measuring category performance.

The category role matrix is used here along with other parameters such as sales volume and all-time favorite GMROI (Gross Margin Return on Investment).

Category Management As a Process

Step 5: Category strategies:

Involves the development of marketing strategies for the category.

Category marketing strategies can be classified into the demand-chain and supply-chain strategies.

Step 6: Category tactics:

This is to determine the assortment, pricing, promotion, shelving and supply-chain tactics required to ensure that the strategies work.

Step 7: Implementation:

Store level execution of the category management process is perhaps the most vital link in the entire chain.

Category Management As a Process

Step 8: Review:

This phase involves monitoring the category and taking any action requiredto ensure that the category management process delivers maximum value.

Partnership:

Perhaps the most crucial element for the success of category management is the partnership between the retailer and supplier.A partnership that focuses on the consumer and providing her with value. In order to make this happen, the measures outlined below may be of some use:

Agree on just how the partnership is supposed to work, including details of the level and degree of the relationshipEstablish a match between the strategies of the retailer and the manufacturerSet priorities for the categoryCreate a mechanism for measurement and monitoring.

Other Crucial Elements

A Category Captain The category captain is a supplier who

will form an alliance with the retailer to enable the latter to develop consumer insight, satisfy consumers and improve performance and profit across the entire category.

For instance, the FoodWorld chain of food and grocery stores is working on a joint category management programme with some manufacturers. The bottomline in such an arrangement is that the category captain must have an understanding of the core consumers for the category as well as an understanding of the core consumers for the retailer.

Other Crucial Elements

Getting the optimum data mix

Market What is happening in the market? e.g. - Environmental trends may affect packaging. - Health focus may affect product ranges and demand

Retailer What do you need to know about the retailer? e.g. - Share of category versus competitors, - Retailer strategy, - Customer profile

Supplier What do you need to consider? What is the company strategy? What are they trying to do with their brands? What supply challenges are they facing?

Shopper/ Consumer

Who are they? How do they differ from the national average? How do they view the category? What drives their behavior?

It is important, when gathering data, to ensure a good mix is used in order to establish a balanced and complete view.Both retailers and suppliers viewed Range Performance as the most important information. Retailers’ focus continues to be on range with Range Gap Analysis stated as the second most important data type, whilst suppliers’ focus is on Shopper Insight & Missions.

Four key phases : Day-to-Day Category Management process

An Indian Scenario

Focus on : Customers, Roles, competitors and

performance

For Indian retailers, strategic category management is key to reducing costs, increasing ales and improving profit

margins- all while keeping customers happy

By replacing subjective decision making data-driven analysis, category managers

can make better product decisions that lead to better results and more satisfied

customers.

Sound category management combines the rigor of science and analysis with the dynamic world of retail.The sooner Category mangers use prove processes and data driven analytics rather than trust their “gut feeling” or rely on purely experimental decision-making, the sooner profits will rise.

Improving Category Mgmt – An Indian Scenario

To ensure top-and bottom-line improvements while keeping customers happy.

Take a customer focus : Sales is often the only indicator Indian retailer use to measure their performance and identify where to improve, where to improve or availabilityAdopting consumer information, which can come through primary research, suppliers and point-of-sales data

Define Category Roles: The four key categories that dictate what products to offer customers and the best format:

Destination: Products that draw in customers and drive perceptionPreferred : Products that move profits and the bulk of salesOccasional : Products that are needed, but not every dayConvenience: Impulse purchase and add-on-sales

Understanding these different categories and roles they play allow category managers to make more tactical decisions about assortment, price, placement and promotions

Watch the competitors and suppliers: Retailers need to track all competition closely, especially within destination categories, as these products should never be priced above competitors

Strengthen operations and performance: For many Indian retailers, the best category strategies often remain on paper, as roles between category teams and store operations are never clarified.

Four Golden Guiding Principles For Indian Retailers …

Full-scale adoption requires considerable amount of reorganization

Skills shortages

Difficulty in accepting suppliers as allies

Reluctance to change inappropriate organizational structures

Lack of clear strategic plans

Lack of variety offered to customers

Threat to smaller suppliers

Drawbacks Of Category Management

Despite the fact that category management in India is still at a nascent stage, most retailers are rather clear that it will gain in importance over the next few years. For one, it will evolve into an essential component of business planning by virtually all retailers. It will also be driven by better partnerships between retailer and suppliers. And finally, there will be greater focus on the consumer

Conclusion

References• “When Business Becomes a science” Business line January 2002• http://en.wikipedia.org/wiki/Category_management• Foodserviceindustrynews.com• http://www.ups-scs.com/solutions/white_papers/wp_category_mgt.pdf

http://avail.com/wp-content/uploads/WhitePaper_BehavioralCatMgt.pdf• The Essential Guide to Day to Day Category Management

Publication Date: 2000 ;ECR Europe Author: Luc Demeulenaer, Grant Withe, Hubert Weber, Michel Joannic, Chris Turner

• White paper published by Brian Harris, Ph.D.Founder and Co-Chairman, The Partnering Group