category management rajnish kumar itc retail retailing management
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Category Management
Rajnish Kumar
What is a Category ?• A group of products with similar attributes • Distinct from other products but not necessarily among themselves• Can be substituted by each other• Stores, stacked and sold in a similar manner
We can therefore Sum up :
A category is a group of products which meet a similar consumer need so that the products are inter-related or substitutable.
Examples – Juices, Shaving products, Inner wear, Toys and Games
Therefore ,Category Management.. Category Management is a
process of maximizing sales and profits while enhancing product value and customer experience
• It is achieved through active involvement of all stake holders Manufacturer, retailer and customer
• While it is a business requirement for the retailer and manufacturer to partner with each other, the customer is engaged by the retailer in order to understand buying behavior and preferences to achieve more from less.
• The value thus captured is retained partially by the retailer and is passed on in good measure to the customer to gain competitive advantage
• Category management is not an event but a continuous process of course correction through performance measurement and action
Category Management is a Business Process
Define the Category (i.e. what products are included/excluded).
Define the role of the category within the retailer.
Assess the current performance. Set objectives and targets for the
category. Devise an overall Strategy. Devise specific tactics and
Implementation. The eighth step is one of review which takes us back to step 1.
Category Drilldown and Definition• By Brand Branded National Brand
Local Brand
Private Label Economy/Value
Premium
• By Usage Fresh
Canned Juice concentrates
Category Role
Category Role
Retailer View Customer View Example
Traffic Builder
Lower Margin
High Frequency
Saving
Top Ups/Convenience
Fruits and Vegetables
Eggs
FMCG
Cash Cow High Margin
Destination
Aspirational
High cost of acquisition from alternate source
Toys and Games
Home Linen
Branded Luggage
Perception builder
Medium Margin
High Fashion
Value Pricing
Lifestyle
Apparel
Category assessment• Who is the Target customer ?• What Inventory is required to sell profitably• How Much Shelf Space is allotted• If we use the same space for something else
what margins can be generated• Is there an impact on sale of other categories• How much stock is sold on promotion• Shrinkage and pilferage constitute what
percentage of margin• Is there any Non Sales Revenue being
Generated• Is there a Potential for growth
Identifying Gap between current and potential sales
Category Scorecard – taking stock
• Sale Potential vs. Achievement
• Target Margin vs. Achievement
• Target NOM Inventory vs. Avg. Inventory
• Cost of sales
• System requirements – cost
• Manpower allocation
• Is it Profitable to do Business ??
Category Scorecard – taking stock
• Sale Potential vs. Achievement
• Target Margin vs. Achievement
• Target NOM Inventory vs. Avg. Inventory
• Cost of sales
• System requirements – cost
• Manpower allocation
• Is it Profitable to do Business ??
Category StrategyRetailer • Low Margin – High Volume• High Margin – Low Volume • High Inventory – High Margin • Low Inventory – High Turn strategyCustomer• Market Share/Price Positioning • Fashion Driver • Bottom line Contribution• Top Line Contribution
Tactics to achieve Strategy Product based Tactics • Pack of 3 briefs @ Rs 99 with 10 % margin• Rs. 20000 wedding collection Sherwani• Exclusive range of Leather footwear• Fast Moving Consumer goods – Toothpaste,Diapers Operational Tactics • High stacks in the action alley to give feel of plenty• Exclusive Boutique look with pictures of Models• Wide range of Leather Shoes in all possible color,size and brand
options
Key Elements of Category Plan implementation
• Everyone has to be on the same page• Designation of Authority• Systems to be in place• Approvals have to be smooth as per well defined
processes• Clear assignment of responsibility• Mission critical Timelines • Dip sticks for course correction• Pre determined measures of success
Category Review
Can be a 3 stage process :
• Research and opportunity identification
• Creation and implementation
• Metrics, correction and learning
Category Captains
• The best and biggest suppliers having a pan market presence are appointed by several retailers as Category Captains
• The Category Captain will be expected to have the closest and most regular contact with the retailer and will also be expected to invest time, effort, and often financial investment into the strategic development of the category within the retailer.
The Category Captain is often - but not always! - the supplier with the largest turnover in the category.