Decoding Category Management for C-stores

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Decoding Category Management for C-stores

By Renee M. Covino, Convenience Store News - 02/10/2016

NATIONAL REPORT — Category management has been around for decades — except in the convenience channel where strategic advancements are only more recently gaining traction, but often with points to ponder.

When a c-store buyer or merchandiser morphs into a category manager, does that mean the chain is practicing top-down category management? Does a category management title equate to category management training?

How about the differences among c-store types such as neighborhood stores, commuter stores and interstate stores? Are the distinguishing characteristics and demographics of each taken into category management consideration?

And what about the increasing industry consolidation — the restructuring of c-store chains that buy out other chains — how do the category management practices of one get aligned with the other?

These are just some of the questions offered up by category management experts who are working to better educate and evolve the convenience channel as it moves forward on the two basic words — category and management — that, when put together as a retail business concept, add up to complex and differing definitions.

While most industry professionals agree on the prize — increased profit and customer satisfaction — the ambiguity over the practice of category management starts with the fact that it lacks a single, clear definition.

The Nielsen Co. has labeled it a process that involves managing product categories as business units and customizing them (on a store-by-store basis) to satisfy customer needs.

The grocery industry, where the practice of category management began, originally defined it as the strategic management of product groups through trade partnerships that aims to maximize sales and profit by satisfying consumer and shopper needs.

More recently, category management at its core has become a discipline that allows retailers to manage merchandise productivity through sales analytics, as Brian DeLong, senior vice president of marketing agency Catapult, told Convenience Store News.  

Traditionally, the key metric has been space to dollars, with category managers answering the question: How productive is this amount of shelf space? DeLong explained that category footprint and assortment, along with some pricing decisions, were often based on this simple efficiency model. “But it has become so much more complicated with the addition of store operations, transaction composition, item incrementality, shelf presentation, shopability, profit contribution and trip missions,” he said.

“Across retail channels and formats, category management is being used for more than simple management of shelf productivity,” he continued. “It is responsible for driving store differentiation, shopping experience and store growth through higher-value trips and shoppers.”

C-stores’ Slow Crawl

Many believe that even more “catman” complexity surrounds the convenience channel, which has lagged behind in the practice. The reason for this, according to experts, is partly the significant differences in convenience store types, such as the aforementioned neighborhood store vs. the highway store. These differences were not addressed in the traditional category management practices outlined for supermarket retailers decades ago.

Another reason for c-stores’ slow crawl into category management initially was the fact that easy-to-manipulate data was so scarce in this channel.

The way Category Management Knowledge Group (CMKG) President Sue Nicholls views category management in the convenience channel, it is used by the larger chains, “but not all individuals with category management titles have undergone category management training,” she emphasized to CSNews. She further observes that many mid-sized and small retailers either do not utilize the practice or they use it on a limited basis. “They may also outsource it to their suppliers vs. participating as a team with the retailer as the leader,” she stated.

Overall in the convenience channel, internal data is underutilized and “retailers rely too much on third-party information and input in their decision-making,” according to Nicholls.

But she sees the opportunity for c-stores “to create their own internal category management strategies and best practices (including defining their target shopper); train their team on the strategy and how to make more-aligned and fact-based decisions in their jobs; and lead the charge instead of being led to ensure they are making the best choices for their stores and shoppers.”

Recognizing the opportunity to “convenienceize” its certified category management training, CMKG recently partnered with b2b Solutions LLC in developing a new online category management training program that’s tailored specifically for convenience and small-store retailers, based on needs identified by the NACS category management standards for c-stores.

Nicholls said she is “blown away” by how many retailers don’t buy into category management training and she identified this as one of the convenience channel’s biggest barriers to establishing an effective category management foundation.

Another barrier is that c-store category managers are limited until they are armed with a strong strategic direction and a documented retail positioning from senior management. Among the overarching strategies that senior management must effectively articulate are: vendor collaboration, the target shopper, competition and private label brands, Nicholls advises.

Bigger Data, Better Shopper Understanding

Going forward, the tools for effective category management are evolving.

More data is available than ever before, with some retailers accessing store-level and hourly point-of-sale scan data, transactional data and shopper data.

The next evolution? Big data, according to Nicholls.

With more data comes improved technologies. “Ultimately, retailers are going to require less technologies that integrate more data sources for a more effective view of the data,” she explained. “The harnessing of big data and subsequent insights will evolve to further improve shopper understanding.”

Collaborations between retailers and vendors are evolving, too. “This partnership goes beyond category captains and represents an opportunity for most retailers and vendors,” Nicholls maintains.

Vendors that sell to the convenience channel “need to ground themselves in the foundations of category management and realize the significant differences not only vs. other channels they may sell in, but across store types and formats within the channel,” she said.

“There are some common practices evidenced in the c-store channel that have too much focus on contracts, negotiations and ‘the way it’s always been done’ and not enough focus on the shopper and what the retailer is trying to accomplish,” she stressed. 

For more on the role of category management in convenience stores, look in the Convenience Store News Guide to Category Management, coming out later this month.