Blackberry

Category Management: The Road Ahead
Win Weber’s Leading Edge Perspective
Category management, which is based on sound business principles, has heightened awareness of the importance of category level planning, and it has changed, for the better, behavior throughout the industry. It is producing favorable results with a vast majority of those retailers who are implementing the concept. Thereare countless examples of how category management has contributed to sales and share growth, reduced costs, improved profits as well as how it has influenced customer count, transaction size and market basket composition.
Despite the many successes, the concept is receiving mixed reviews from both retailers and suppliers. Retailers are concerned about the exhaustive resources required toimplement the textbook version of the concept, and the apparent inability of suppliers to remove brand biases and truly focus on total category performance. Suppliers are questioning the return-on-investment for resources deployed to support category management initiatives. Whatever the case, there is a growing consensus that while the concept is producing favorable results, it is falling far short ofachieving its fullest potential.
When category management is not measuring up to expectations, the causes can usually be found in one or more areas related to the implementation practices being pursued: the retailer has not been able to translate the “Best Practices” textbook to practical application; there is no formal retailer/supplier collaborative relationship strategy, plan or commitmentacross the organization; the focus is more on internal measures than on the consumer, and category plans are poorly executed at store level.
Our perspective regarding each of these areas follows:
·         The publication of industry “Best Practices” four years ago established a common understanding of category management as well as standardized practices. A good “starter kit” that is must readingfor all beginners. But over time this textbook has proven to be too theoretical, too comprehensive and template driven. It does not provide adequate guidance on how to translate theory from the classroom to practical application in the marketplace. Consequently, those retailers who are trying to follow the “Best Practices” guidelines are having difficulty doing so within existing resources andcapabilities. Several leading retailers have flatly rejected the guidelines. This has led to broad ranging applications and considerable compromise of the concept. We have learned, beyond a doubt, that one size does not fit all. In fact, a recent industry survey indicated that less than ten percent of retailers are following the guidelines.
It appears that category management may be movingforward like a rudderless ship in the sea… with a dire need for course correction. The direction must shift toward practical application with specific guidelines to tailor the concept to fit individual retailer situations.
·         Establishing collaborative relationships between trading partners is an essential component of category management. Collaboration aligns strategies, systems, processesand people for the sole purpose of reducing the cost of conducting business while better serving the consumer. There has been good progress in this area driven primarily by technology and logistics initiatives. Overall, relationships between trading partners have definitely improved. But not to the extent required to support the evolution of category management.
A very small percentage ofretailers are doing it right. A large number of retailers do not believe collaboration is an important part of the category management process; some believe in collaboration only when it is self-serving; few have formalized collaborative relationship strategies and plans; and investment in upgrading collaborative skills is limited to a handful of retailers. This situation is compounded further by...