Merchandise Category Meaning, Importance, Components, Role of Category Captain

Category management is a retailing and purchasing concept in which the range of products purchased by a business organization or sold by a retailer is broken down into discrete groups of similar or related products; these groups are known as product categories (examples of grocery categories might be: tinned fish, washing detergent, toothpastes). It is a systematic, disciplined approach to managing a product category as a strategic business unit. The phrase “category management” was coined by Brian F. Harris.

Retail category management aims to meet consumer needs, by focusing on consumer-oriented marketing and merchandising practices. Partnerships between retailers and suppliers are the foundation for effective category management. Usually, a category captain is appointed to build the relationship between supplier and retailer to maintain healthy communication.

A category manager is a valuable resource, helping retailers make category management decisions, providing them guidance on merchandising questions, like what, how much and where. A category captain manages the retailer’s inventory and displays its products, enhancing their core performance, while achieving their goals – selling more of the products.

The collaborative partnership between retailer and supplier is a source of competitive advantage. Such a partnership improves customer service and asset utilisation while increasing profits and reducing costs.

Performance measurement >> Strategy >> Organizational Capabilities

Trading Partner Relationships >> Business Process >> Information Technology

The category management 8-step process (Retail)

The industry standard model for category management in retail is the 8-step process, or 8-step cycle developed by the Partnering Group.[10] The eight steps are shown in the adjacent diagram; they are:

• Define the category (i.e. what products are included/excluded).
• Define the role of the category within the retailer.
• Assess the current performance.
• Set objectives and targets for the category.
• Devise an overall Strategy.
• Devise specific tactics.
• The eighth step is one of review which takes us back to step 1.

Significance of Category Management:

• Increased sales, goodwill and market share
• Proper care and devotion to each item of merchandise
• Increased sales further lead to increased turnover
• Maximize shelf efficiencies
• Less inventory shrinkage
• Recognizes procurement opportunities
• Enhances customer knowledge level
• Improves return on investment (ROI)
• Decreases chances of out-of-stock positions
• Enhances return on money invested in marketing efforts
• Classifies the performance of brands as doing well, not doing well, problem brands, etc.
• Purchasing merchandise exercise becomes easy and cost effective.

Essentials / Prerequisite of Category Management:

• Category should be divided and arranged as per consumers’ ease not because of retailer’s convenience.
• CM should be based on differentiation and uniqueness.
• CM should drive multiple item purchases at the same time.
• It should result in better customers’ relations rather than relations with suppliers.
• Category division should be based on the basis of product response, space, time and profitability.

Components of merchandising planning

Merchandise or product is the most basic component of merchandising planning. The retailer has to provide products which are expected to be demanded by his consumers. He is required to keep enough inventory of each products category so that he never runs out of it and lose business.

Products can be classified in the following categories:

1) Seasonal products:

This type of products is in demand in a particular season. An adequate amount of this type of products has to be kept in inventory before the beginning of the season, and it should be maintained properly so that it can sustain the whole season.

2) Staple:

Products which are always in demand such as food, clothes, etc. irrespective of the season. Adequate inventory should be maintained for such products.

3) Fashions:

Products which will remain in demand until fashion prevails. The retailer has to buy an estimated quantity of such products to last the fashion without running short of it.

4) fads:

This type of products has a limited period of demand. Retailers have to buy such products carefully by rightly estimating the fads.

Importance of merchandise planning

Buying merchandise and placing them in store for selling is one of the biggest expenses a retailer makes. There are several additional expenses that come with merchandise are delivery costs, shipping costs, storing costs, etc. in case you order wrong merchandise, your expenses will be doubled easily.

However, having a merchandise plan is much more important than only saving money. You will often find yourself struggling to meet consumers’ demands if you don’t have a well-prepared merchandise plan and satisfy the consumers’ needs is one of the most important duties of a retailer.

You can use available the right product, at the right time, at the right place, and in the right quantities only if you plan everything ahead. You can think about the consequences in case you fail to plan properly.

There are chances that your shelves will be overflowing with the wrong type of merchandise, and then you will have to provide heavy discounts to get rid of the excessive undesired merchandise.

Moreover, if you fail to provide the right merchandise at the right time, then your customers will move to your competition.

Category Captains

It is commonplace for a particular supplier in a category to be nominated by the retailer as a category captain. The category captain will be expected to have the closest and most regular contact with the retailer and will also be expected to invest time, effort, and often financial assets into the strategic development of the category within the retailer. In return, the supplier will gain a more influential voice with the retailer. The category captain is often the supplier with the largest turnover in the category. Traditionally the job of category captain is given to a brand supplier, but in recent times the role has also gone to particularly switched-on private label suppliers.

In order to do the job effectively, the supplier may be granted access to a greater wealth of data-sharing, e.g. more access to an internal sales database such as Walmart’s Retail Link.

The Responsibilities of category captains

Category Captains drive retailer profits by the strategic development of a specific category, building upon their knowledge and expertise of how consumers think and act when they enter a store.

When an inconsistency occurs, like what happened during my Sunday shopping trip, some consumers will abandon the store in search of another one which offers fast and convenient product placement. The category manager aims to prevent this from happening.

Other responsibilities of Category Captains include:

• Deciding which products should be on the shelf of their category.
• Determining how much space each product deserves.
• Taking sales into consideration when allocating space to products, without exerting bias toward a particular product.
• Developing Planograms for their category on behalf of the retailer.
• Managing the relationship between retailer and category partners.
• Creating the product placement layout and sending the category partners for feedback.