Are You Evolving?
Category management has been around for a long time. It was introduced in the early 1990s as part of Efficient Consumer Response to address the industry problems associated with the entire demand and supply operating continuum. It has evolved — and continues to evolve — as the shopper changes, data and technology become more sophisticated, digital continues to play a bigger role, and organizations are striving to achieve collaboration with their retail and vendor partners.
The other thing that’s evolving is the retailers that are competing for the convenience store shopper. According to the Category Management Association in its CatMan 2.0 whitepaper, more than 90 percent of store growth is coming from increasing store count, particularly in the form of smaller-format stores (that compete with c-stores). Retailers are focused on ensuring they can compete in this changing environment by having the right store format in the right geography at the right time. This is because many retailers are dealing with challenges in trip consolidation, with leakage to other competitive formats (including c-stores). Many continue to expand store count to secure a position in the right place at the right time.
So, as a single-store owner or small operator, how are you going to compete with this continual growth of small stores that compete with the convenience channel and target the quick-trip shopper?
The category management framework can help you become more strategic in your approach to make decisions on what to carry and how to shelve, price and promote it to better meet your shopper’s needs. By moving to this approach, you will set up rules and guidelines to help you make easier, better and more strategic choices for your categories.
The opportunity is to develop better-defined strategies, guidelines and processes that are shared both internally and with your distributors, wholesalers and vendor partners.
As part of your overall strategies, you also need to:
Properly define your categories and your segments
Category definitions need to start with the shopper. Maximize your opportunity for success by grouping items in your store together based on products that deliver the solution to a similar consumer need, are substitutable in consumer usage, and/or have similarities that when managed together create a total effect for the shopper.
Category definitions are affected by retailer format, strategies, category role and the target shopper. How the term “category” is defined is also essential to achieving success for your store. The good news is that NACS, the Association for Convenience & Fuel Retailing, has developed category definitions for c-store retailers that consider the differences of this store format. All you have to do is adjust the definitions based on your store type and store size.
In net, categories that are larger and more important to your store and shoppers will usually have a more narrow definition, while ones that are less important will have a broader one. Get your category definitions right because it directly affects other areas of the business.
Assign category roles to give you more focus
Not all categories are created equal, nor should they be treated equal. Category roles allow you to take a broad look at your category mix, determine the category’s relative importance, and apply similar tactical strategies across categories with the same role. This is an important foundation of your overall retailer strategy.
Once you assign your categories, you need to establish your own strategic guidelines and principles across the tactics based on the role that is assigned. For example, destination categories (those that shoppers drive to your store to purchase) need to have a broader assortment (more items offered), more shelf space and prominence in your store, and more competitive pricing strategies. By applying these strategies broadly across categories within a specific role, it makes your job much easier when you are making tactical choices for your categories.
To summarize: Category roles are an important part of your category management foundations. By assigning roles and formalizing the tactical guidelines for each role, you’ll have a more aligned and consistent approach to categories across your store.
Analyze your data and demand more from your partners
Do you trust your gut instinct, intuition and experience to help guide you in making decisions for your store? Your opportunity may be to continue to tap into your instincts, but double-check them with data. There is incredible data available to you today that has not been available in the past. The big c-store chains are armed with data that goes beyond just what sells in the stores, to daypart data (what is sold at different times of day), to shopper insights that answer why they buy, to high-end technologies that house all the data.
You don’t need all the fancy tools and technology to start to make more fact-based decisions for your categories. By tapping into your store point-of-sale (scanned sales) data, you can measure how your categories are performing vs. a year ago, make decisions on what products to list/delist, and set some strategies for your most important categories that go beyond a percentage growth objective.
You can also tap into your distributors/wholesalers/suppliers and ask them to provide you with analysis of your purchases by SKU year over year, category insights, and planograms to help you make better decisions across the tactics. This provides an alternative to get the SKU data if your store doesn’t have a system that can produce it in a good format.
As category management evolves, and as the convenience channel continues to be more competitive with more stores, you need to adjust and improve your approaches to stay relevant in today’s world. By adopting some CatMan foundations into your store approach, checking and adjusting your strategies (including reviewing category definitions and roles), and looking at your business in a fact-based way, you can carve out a new path for the future with a more strategic focus on the shopper that ultimately drives sales and profit for your store.
Editor’s note: The opinions expressed in this article are the author’s and do not necessarily reflect the views of Convenience Store News.
Sue Nicholls is founder and president of Category Management Knowledge Group (CMKG), based in Calgary, Canada. She is a speaker and consultant, working with business partners to bring category management training solutions to different areas of retailing like the convenience channel.