Category management: how to manage the assortment

The category management system is no longer new to most major international companies. However, in Russia it is not so widespread and its implementation is not always successful. The reason, as a rule, lies precisely in the construction of the system. The leading consultant of Fashion Consulting Group Galina Kravchenko talks about the importance of a systematic approach and the elements of category management.

Galina Kravchenko -

Fashion assortment management expert and business consultant, specializing in the development/purchase of commercial clothing and footwear collections, adapting commercial trends, formalizing style DNA, and category-based assortment management across various sales channels (offline, online, marketplaces, wholesale). https://t.me/galina_krav

How the procurement system works now

The biggest problem of the traditional procurement system is that the assortment management chain in it is broken: some employees select the assortment and procurements, the rest of the goods are controlled by others, and the third ones are merchandising. As a result, the company’s actions become inconsistent: some goods are sorely lacking, others are purchased in abundance, in the third - inadequate assortment, in the fourth - excess, and all have forgotten about some goods. As a result, consignments of shoes with low turnover settle in warehouses and shop windows or trademarks appear that do not fit into the general trading concept of the network.

Often conflicts arise between divisions: the sales department is dissatisfied with the assortment and prices, the procurement department with the pace and volume of sales, and the marketing department is usually the most extreme. And the leadership asks the eternal questions “Who is to blame?” And “What to do?” Unfortunately, with the described approach there is no one to ask. It is necessary to change the system of work itself.

One of the reasons for the difficulties is that the procurement process is divorced from the real situation in the store. Buyers focus on operational tasks (to buy the right product on time at a bargain price), but ignore strategic issues: creating assortment positioning that is different from competitors and unique in the eyes of consumers.

How to make the system better

These problems can be solved with the help of category management technologies.

Category Management is an approach to improving the performance of retail companies and their key suppliers, developed in the early 1990s by the international consulting company The Partnering Group (TPG).

The key idea of ​​this approach is the allocation within the assortment group (or product lines) of product categories, for example, OUTDOOR shoes stand out among all footwear for outdoor activities. On the trading floor, she appears separately from casual shoes or comfortable shoes. For its promotion, special POS materials are used. An explanatory work is carried out with staff so that sellers can professionally explain the advantages and additional consumer properties of this shoe. And the most important thing is that they understand for which buyer this category is included in the range and for what purpose people will buy it. Will a person use shoes for “cross-country” mountain routes or is it his clothing style that requires OUTDOOR boots.

Product categories are distinguished according to customer preferences. Particular attention should be paid to this, because the assortment should be divided based on the psychological aspects of shopping. And they will not necessarily coincide with the generally accepted commodity classifier. Another important feature: all categories should be a single collection - as perceived by the store buyer.

This approach is the basis of the ECR program - Efficient Consumer Response, which has become the starting point for developing the idea of ​​category management.

The procurement process within the category is not limited to compiling an assortment and controlling balances. All business processes of product management are affected: from the development of a store concept to an action plan for sales promotion on the trading floor.

At the same time, the entire chain - from assortment selection to the sale of goods - is connected and controlled by one employee within each category (category manager) and the head of the assortment management department - in all categories. Thus, the purchasing process becomes holistic. Let's consider each of the principles of category management in more detail. Approach the assortment of a store as a collection of all categories

This is one of the key points in assortment management in shoe stores.

The buyer sees the store as one. He is not aware of the structure of the company, whether there is category management or not. He does not know about the interaction of the category manager and the store director. And he knows nothing about the structure of the assortment of the store; he sees only the goods in the store and perceives all categories of goods related to each other. And if they are presented in different ways, if these categories differ greatly among themselves, then it will be difficult for the buyer, or rather, inconvenient to navigate.

To create a style structure for the assortment that maximally meets the needs of a specific target audience, Fashion Consulting Group applies a unique concept of functional-style groups. As a rule, four main functional-style groups are distinguished in shoes: classic, casual, sport, sport fashion.

In the wardrobe of each target audience there are all these groups. Their specific content (style, innovativeness, proportions of the types of assortment) is consistent with the lifestyle of customers. It is this approach that allows us to create an effective assortment strategy and increase customer loyalty.

Division of assortment into categories based on customer perception

The essence of the categorical approach is the allocation of categories in the way our buyer identifies them, and not in the way convenient for the purchaser or merchandiser.

This is the response to consumer requests; often a consumer in his mind groups goods differently than a professional purchaser. The buyer knows his goods too well (which is certainly correct) and often operates with brands and suppliers that may not be known to the buyer. The buyer often comes to the store for the goods, and not for the brand: a brand for him is not always the main criterion for selection.

In fact, why are you going to the store - to buy any product under the Salamander brand, or do you still need shoes?

Therefore, we emphasize that “category management” and “branding” are not equivalent concepts.
This is crucial: category management involves dividing the product range into classes, groups, and categories, sometimes contrary to generally accepted logic and classical merchandising. The division of goods into categories and groups may not correspond to any state classification system. For example, according to GOST 23251-83, footwear for active recreation includes footwear for walking, leisure, and physical exercise. However, moccasins, which perfectly fit this description, are appropriately classified as casual footwear. Because that's how the customer thinks and won't look for moccasins in the sports shoe section where sneakers are sold.

To divide the assortment into categories, you need to know your buyer. To do this, you need to identify customer segments and in each segment examine their preferences - how they think, how they perceive your store and what categories they think.

Further, based on the expectations of its target audience, each network develops its own system of product categories, on the basis of which it optimizes the assortment and organizes the correct (correct for the buyer, not the store director or warehouse manager) display of goods on the trading floor, which ultimately leads to sales growth.
Responsibility of one employee for the entire category movement cycle

We decipher the concepts of management and responsibility in relation to categories.

Category management means that the category manager himself (not his boss, nor the supplier, nor the store director) decides what to import and at what prices, what turnarounds and profits for the category to plan, what retail price to put in the store, how and where to post POS materials, on which shelves in the store to put goods, how much money from the advertising budget to spend on promotion.

He coordinates the sales plans and profit plans, he decides what to do with illiquid assets (which, alas, he also purchased). He solves all the basic issues with suppliers (who should be paid in the first place, whom to replace, with whom to be friends, and who needs eye and eye).

Advertising

Advertising of Business Global Expo LLC, Taxpayer Identification Number (INN) 7710961530, erid: 2W5zFJRB7Va

Without such authority, the category manager is simply an executor, a line manager, who performs only part of the work (for example, he deals only with procurement and logistics, while another employee is responsible for sales). This is not enough to manage the assortment, since the management function should be concentrated in one hand. It's like driving a car - one person must step on the gas pedal, change gears, brake and steer.

With leverage, a category manager is responsible for selling categories. This means that he is responsible for his salary and position so that the sales of the goods that he purchases are “good” (that is, they are satisfied with the management). So that for these goods, both turnover and profits and liquidity should be “good”. If the results are poor, then the category manager does not receive money and can be removed from this post. Of course, everything here depends on a properly constructed system for planning the indicators of assortment efficiency and staff motivation.

The category manager monitors the sales of the category, regularly receiving data from stores on the implementation of the plan. If sales lag behind the planned ones, then the category manager is interested (motivated) to take some active actions on the sale: he gives the order to lower the price or change the calculation, he gives the command to the marketers to conduct a survey and find out why his product is selling worse than before, etc. It is clear that, not having the authority to give orders, he does not affect sales, does not manage the category. Therefore, the key point in category management is the empowerment of an employee with the authority and responsibility for managing the category.

Consideration of the category as a mini-enterprise within the company

The category manager is responsible for purchasing and selling the category.

He manages the category as one enterprise - with his own procurement, sales, pricing and promotion policies. In fact, the category manager is a mini-commercial director, and the category is a mini-enterprise within the assortment.

This is the key to efficiency: any owner of a trading company will strive to make more profit. He will be interested in buying liquid goods, not having surpluses, so that sellers are able to sell them, so that the cost of goods is minimal, and the margin is the maximum possible. And the category manager approaches the category from this position, it is his full responsibility and his earnings.

Like any commercial enterprise, the category should have:

- your development budget (how much money will we invest in advertising and which models will appear in the layouts?);

- its pricing policy (what trade margin will we set for this collection of shoes? How are our competitors or lower?);

- people who will provide sales (if necessary, the category manager will train or organize training with the help of the supplier for sellers in the hall);

- their distribution channels (these are company stores).

We see that the consideration of one moment of category management pulls others. That is why category management is the system. You can’t introduce category management in one department, you can’t ignore the issues of category management without talking about the motivation of the category manager, and the question of the structure of the range without the buyer and the concept of the store as a whole.

Where to start when switching to category management?

In fact, it is necessary to start not with processes, but with a common understanding of the value of this management method. Category management will help the company to work effectively in a competitive environment not because “we have it”, but because the company:

- linked the assortment management strategy with the strategic goals of the company;

- made the necessary adjustments to the format and positioning of the store;

- optimized assortment policy as a set of tactical assortment management tools;

- chose the methods of analysis of work with the assortment;

- revised the organizational structure and distribution of responsibilities between departments and posts;

- developed clear criteria for assessing the effectiveness of employees.

It should be noted that at the stage of implementation of category management, almost all enterprises with rare exceptions encounter a number of problems that are systemic in nature and extend far beyond the boundaries of one procurement unit. Failure to understand them can lead not only to difficulties in the transition to the category management system, inefficiency of changes, but also seriously harm the business as a whole. Using at this stage the experience of other companies or inviting consultants with the necessary experience will significantly simplify the implementation of category management and maximize its effect.

For your information:

A store that manages its product range perfectly is:

1. A store that manages categories, not goods.
2. A store that regularly updates the range.
3. A store that forms a shelf the way a customer would form it.
4. A store that knows how to forecast demand and bring to market products that will be in demand the day after tomorrow.
5. A store that has in each category at least one unique product offering that meets the interests of the target group of customers.
6. A store that loses a minimum on costs.
7. A store that has an optimal pricing policy that combines a differentiated mark-up for each of the product groups.
8. A store with a private label and its own unique products.