When I worked for WHSmith back in the 1970s and 80’s, they had a central buying division that negotiated range and price. The stores did selling and replenishment ordering. This was the time before scanning became commonplace, and the only evidence of store purchasing was from invoices.
Smiths understood the need for improving control and had developed their distribution centre in the mid 1960’s at Swindon. Central distribution of top selling products gave them control of margins.
Smiths may have faded somewhat in the supermarket-dominated retail world that we have today, but the lessons of category and profit margin control are probably more important now than ever before.
With the domination of the multiples, and consumers still feeling the economic pressures left behind by the credit crunch, independent retailers need to ensure that all their space is delivering the profit they want.
This requires a systematic and disciplined approach to every product category in your store. This is where category management can help. Category management is a process needs to be understood and put into practice. There is a comprehensive industry standard model for category management in retail which describes an eight-step process:
- Define the category, what products are included/excluded.
- Define the role of the category within your store.
- Assess the current performance.
- Set objectives and targets for the category.
- Devise an overall strategy.
- Devise specific tactics.
- Review results and progress.
When I became an independent retailer in 1989 I found that manufacturer support in the area of category management was quite biased towards their own products. Of course store based sales data was not easy to access as scanning had not reached many independent store at that time.
Since then the support that retailers can now access is almost entirely industry based, with schemes P&G’s ShelfHelp helping lead the way.
Next week betterRetailing contributor Ammo Bhdaal will tell us about how he uses category management in his store.