Category management: concept, fundamentals, essence and process

It is not difficult to increase sales in a retail store: it is enough to optimize the procurement and sales process in order to meet the needs of a potential buyer. This is the area of ​​influence of category management - a relatively new way of maintaining and accounting assortment. Let's take a closer look at how this works.

What is category management

Once upon a time, at the stage of the formation of modern civilization, people acquired various things and objects necessary for themselves in the market - a specially designated place for this in the open air. On the market, you could buy anything: from apples to boots or even a new cart. And no one thought about how to arrange goods, whom to offer in the first place - everything happened spontaneously.

In the modern world, there are too many goods in order to be able to combine them in one place of the city. The market itself continues to exist, but in a completely different quality. Now this is the name of the entire scope of trade. And now in the field of retail trade a huge number of commodity positions is presented.

Retailers, as a rule, work with a large number of brands and suppliers at the same time and are faced with the task of correctly placing goods on the shelves of their stores. Therefore, of great importance for the activities of any retail store has acquired effective assortment and turnover management.

So there was a need to classify all available products. There was a division of goods into categories into groups. Now they are united among themselves according to their characteristic properties and functions. And, as a result, a new branch of trade has appeared, which is called category management - managing each category as a separate business unit with its own turnover, strategies and goals. The assortment of each retail store can be divided into types. And any product that lies on a store shelf can be attributed to one or another category of goods.

The main goals and principles

The essence of category management is to create an optimal system of interaction between the supplier, retailer and buyer, which ultimately will lead to increased sales.

The following principles logically follow from this:

1. The buyer or consumer is the main unit regulating the turnover of goods, so you should focus on the effective formation, as well as the maximum satisfaction of his needs.
2. The main business unit is a specific category of goods. The purchase and sale of products should be governed by a development plan proposed by the category manager at all stages: from the selection of assortment to the preparation of a sales script.
3. The assortment is divided into categories, focusing on the perception of the buyer and ignoring other possible classifications.

Benefits of implementing Category Management

In Russia, the turnover system is often controlled by different departments, for example, procurement and sales. In classical commodity science, these two departments are managed by different people and each one works for himself. The procurement department is responsible for the quality of the product, its price, and the breadth of assortment. And the sales department is for selling all purchased goods as quickly and efficiently as possible. In this case, conflicts of interest often arise. But the logic of category management in retail is fundamentally different. Purchasing and sales department report directly to the manager. Thanks to his plan of promotion and acquisition of specific product categories, the interaction of these structures is simplified. They are no longer competitors, but partners.

And in general, category management shows itself as a more effective way of managing purchases and sales.

Which store will have the most sales? Where did you buy some goods offered by the supplier, focusing on the benefits of the purchase, and place them on the trading shelves, guided by their own convenience? For example, clothing grouped by brand.

Or it will still be better to sell goods that are purchased based on the requests of potential buyers and placed on shelves so that they are convenient to find. There is no point in proving that sales will be higher in the second store. This is the basis of category management.

Stages of the formation of the assortment in the store

Within the category management, the assortment is formed in several stages:

1. The choice of the specifics of the outlet. For example, a sportswear or food supplement store, or a grocery store. At this moment, a general idea of ​​a possible assortment is formed.
2. Development of a store’s strategy in such a way that it would be possible to answer questions: what we sell, to whom, why, for whom our range is designed. At the stage of strategy formation, it is important to consider all the nuances.
3. Assortment structuring is the selection of the necessary assortment, contacting suppliers, drawing up a procurement plan, introducing commodity items depending on their category and brand. At this stage, decisions are made about which brand to promote. It should be understood that this is no longer a strategy, but a tactic that can vary depending on the constantly changing conditions of the real market.
4. Merchandising and pricing. At this stage, questions about product calculations, pricing, and methods for promoting a particular brand are being resolved.
5. Analysis and assessment of the category. The effectiveness of pricing and assortment policy is analyzed. The analysis is carried out according to the following indicators:

• Turnover.
• Profit.
• The percentage of illiquid goods.

Moreover, these indicators are considered for each category separately. Based on the readings, tactical moments are adjusted.

Assortment of categories

A very important point that must be understood when assortment management is that the category is formed based on the needs of the buyer and nothing else. Consumers are already thinking in categories. When a person thinks he needs a refrigerator, he usually watches refrigerators of all brands and manufacturers. And the category of goods here can be called a refrigerator, and not its brand. So across the entire assortment of the store.

In order to form individual product categories, you must adhere to the following algorithm:

• Select product class.
• Combine all the goods for some broad reasons: what is made of, for whom it is intended
• Identify target groups of buyers and study their basic needs.

It is permissible to divide the goods in a standard way according to the similarity of manufacture and application. You can get in this case, such categories as: soap, shampoo, shower gel, bread, cottage cheese, coffee. You can also divide the categories according to the principle of what is used. For example, goods for recreation, fishing, a certain type of creativity.

Almost every category can be divided into subcategories according to properties important to the buyer (for example, all shampoos can be sorted into products for dry, oily or normal hair) and arranged in accordance with this division. In this case, the buyer will be easier to navigate. Shower gels can be divided by aroma. At the same time, the same washing powder is most likely to be sorted not by aroma, but by the method of washing.

To separate the categories, you can use the results of marketing research, the results of observations of buyers in the hall, as well as take the help of sales consultants, who often contact customers and know their basic needs.

Category structure, tree of purchasing decisions

The buyer goes to the store for a specific category. A classic shopping list, such as a grocery store, is as follows:

• Bread.
• Sausage.
• Milk.
• Beer.
• Sunflower seeds.

And already in the store, the buyer is faced with a choice. What kind of bread should he buy? Rye, wheat, chopped, whole. What milk: 6% fat or 3.5? What kind of sausage? Boiled, smoked?

These are all selection criteria and become subcategories of goods that can be classified according to the following characteristics:

• The user of the product. For example, clothing may be female, male, or children's. The latter, in turn, is divided into things for boys or for girls.
• Form and style. The dress can be straight or fitted, soap - lumpy, or liquid, and so on.
• Color.
• The size. For example, clothes. Or, for example, bedding: single, single and double or double.
• The material of manufacture. Vinyl or paper wallpaper. The jacket is leather, rag, suede.
• Taste or smell. Strawberry or chocolate shower gel. Orange juice or multifruit.
• Price.
• The country of manufacture. In wine boutiques you can often see that the wines are arranged precisely by this criterion.
• Also, depending on the specifics, categories can be distinguished in some other criteria.

The consumer makes a choice based on several of the above criteria. The final determination algorithm in a customer’s purchase is called the purchasing decision tree.

Category Properties

To correctly divide the product into categories, it is important to know the purchasing properties:

• Stiffness - the client’s willingness to refuse to buy a product of a certain category if there is not the type that he prefers. Most often, the more expensive the product, the greater the rigidity: in this case, the buyer can be attached to the type of product, to the brand, to certain properties. For example, if he came for an Iphone X of a specific color and with a certain amount of internal memory, then he wants to leave with this particular product. Categories of a different price segment will be undesirable for a particular buyer. And not only by brand, but also by other characteristics. For example, if a customer loves green tea, he will not buy black tea. Or if he loves red wine, then he is unlikely to get white even of the same brand or brand.
• Manageability of a category is the possibility of its expansion and narrowing. The first option is required when there are too many commodity items inside it. In this case, it is divided into several subcategories. A narrowing is the opposite, the inclusion of one category in another, its addition of related products.
• A category’s life cycle is a period of time during which a category is traded in the market. The life cycle has several stages: bringing the product to the market, growth, maturity and decline.

Any category has such a cycle. A typical example would be cassette audio recorders, the life cycle of which began around 1980, when mass commercial distribution of compact cassettes with music recordings began. The growth period falls on the nineties, and the maturity period on the two thousandth. The decline began with the massive advent of CDs and computer technology.

Balance assortment at the outlet

You should determine for yourself, again based on the preferences of the potential buyer, how to balance all product diversity on the shelves of your store.

• Assortment width - the total number of product categories in the store. It may differ depending on the goals of the outlet, its area and location. For example, in a small grocery stall near the house there can be about 15-30 categories. And in a large hypermarket, count hundreds.
• Assortment depth - the total number of product items within each category. For example, plain bread, long loaf, sliced ​​long loaf and rye bread. Or in the accessories store, the depth of the “bag” category will be measured by the number of separately presented models.

• Balance assortment - the ratio of the optimal depth and width of the assortment for the buyer. Depending on the purpose of the store and the role of each category, the balance may be different.

Roles of categories and their classification

Depending on the type of product, each category can be assigned one of four roles.

• A privileged role is the main products of the store, for the sale of which we focus. This is the basis of the retailer’s assortment, which forms the consumer and price perception of the outlet. These categories are the most competitive, therefore, it is necessary to maintain appropriate prices for them: market average or, if possible, lower. Accordingly, these categories demonstrate a large turnover, but relatively low profit.
• A convenient role is assigned to related products that complement the store's assortment. These categories increase turnover, as a rule, they have a high margin. At the same time, the buyer gets the impression of the versatility of the outlet for any purchase.
• A seasonal role is assigned to categories with a pronounced seasonality of sales. Sledges, swimwear, sunblock, Christmas toys and more. These products also help to shape the point of sale as a one-stop place to shop. Moreover, in the season they bring big profits, and in the off-season sales are minimal or zero.

• The role of destination can be assigned to some unusual, original goods that are not yet represented at other points. Such products can become the highlight of the store, attracting a flow of customers. At the same time, the categories in the role of destination do not live long, since competitor stores notice them quite quickly and put them on their own shelves. In this case, the role of the product changes.

Also, all categories can be divided by stages of the life cycle.

• Sleepers are categories whose sales and distribution are declining, but at the same time there is potential for growth and development. It is important to highlight key products in the category, remove products with low turnover and margin, leaving only marginal and negotiable products.
• Perspective - categories that are not yet very popular, but grow well and develop. Here it is necessary to balance the composition of the category in accordance with market trends, if possible, reduce the price of key products. You can add related products. Maximize shelf space at the level of this category.
• Doubtful - these are categories in a difficult condition, requiring some renovations to increase interest in sales. In a separate store, this can not be done. Therefore, it is worth restricting yourself to key products and minimizing the resources allocated to the categories of this role.
• Winners are categories that are well developed, their sales and distribution are growing. It is important here to continue the current policy, quickly solve all emerging problems with procurement and logistics, and monitor the extensive representation of goods on the shelf.

Depending on the role, accordingly, the manager identifies priority categories for a particular store.

Category List Checklist

Accordingly, taking into account all the above, it is possible to form a checklist for the category manager.

• Knowledge of all the characteristics and trends of the category for which he is responsible.
• Understanding the general principles of pricing and marketing.
• Education in marketing, university, and also an advantage will be additional education in the field of category management: continuing education courses.
• The availability of competencies required to make a decision on trade.
• Analytical thinking.

Of course, this is not a complete list, but you can add something of your own based on the specifics of each particular store.

In general, using the arithmetic of category management, you can significantly increase the turnover and profit of any single store.

It is also worth understanding that this is a constant process, taking into account the constantly changing trends of the modern market. Management of the product range, analysis and adjustment of the existing situation should be carried out continuously, then we can talk about the development of the business and its expansion.