Thursday, July 20, 2017

Comment: The new age of Category Management

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There is no doubt that consumers are returning to both bricks-and-mortar stores and online shopping channels with a renewed sense of confidence. Recent increases in household savings levels and lower unemployment rates — along with an $800 billion decline in consumer debt since 2008 — are among the latest signals that consumers are ready to start spending again.

But these consumers are much more impatient than the shoppers of the past. Shaped by today’s culture of hyper-connectivity and instant gratification, shoppers are accustomed to finding the item they want, at the price they want, exactly where they want to buy it. Product availability at the right store and at the right shelf location is becoming critically important to both retailers and consumer products manufacturers. If shoppers cannot find what they’re looking for in one store, today they have a plethora of other retail choices — some only a mile away, and others a simple screen touch or mouse click away.

The cost of getting an assortment wrong, or failing to ensure product availability, cannot be underestimated in today’s ultra-connected and ultra-competitive retail world. When shoppers walk away from a store because they can’t find an advertised special, they may be abandoning a cart full of nonrelated items. They may be headed to a competitive channel, where they can build long-term loyalty. The impact of one disappointment can be significant and lasting. Recognizing these simple facts, retailers are rightly demanding more successful assortments and more immediate product availability than ever before.

Nonproductive stock-keeping units (SKUs) and out-of-stocks are no longer acceptable. Consumer products leaders are responding with new levels of service, collaboration and customization that are only strengthening their advantage in the retail aisle. They are even using their assortments to shape future demand by anticipating emerging consumer needs and proactively shifting both their mix and their merchandising plans.

For many companies, however, the new era of category management has placed them in a reactive mode. Category management executives are struggling to answer foundational questions such as “What SKUs should we be offering?” “How should our assortments vary across stores?” and “What are the unmet needs in our category?”

There is good news for manufacturers as they seek answers to these questions. Just as consumers with tablets and smart phones are armed with new amounts of information that can help them shop, manufacturers also have huge volumes of information that can help them make the sale. Thanks to point-of-sale (POS) information, loyalty program data and other sources of consumer insights, today manufacturers can get a sense of who is buying their products, where they are buying and what price they are paying.

The ability to track consumer buying patterns provides manufacturers with an exacting yardstick with which to measure how the product performs relative to the overall category on the shelf. Yet, acquiring this information is just the beginning. Category management executives must ensure that their analyst teams can use this data to make appropriate decisions efficiently. One way to take advantage of the data is to leverage an intelligent clustering analysis that will garner invaluable insights into specific preference patterns. It helps manufacturers to develop an understanding of the characteristics of consumer demand such as the size or type of the store, volume or packaging of the product, store region/area and consumer characteristics. With this intelligence, manufacturers can develop more targeted assortment strategies and localized shelf execution plans to drive sales growth and profitability.

For category management teams, keeping pace with the fast-changing retail landscape offers new challenges related to business process, optimization, analytics

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