The simplest and simplest definition of Category Management is that it is a product management of distributors taking categories as a group of products.
Category Management has been defined more rigorously by the industry as follows:
Category Management implies defining categories as strategic business units and that it is necessary to involve the supplier to ensure sufficient experience on the category. The objective is to produce high business results by satisfying the needs and requirements of the consumer.
All retailers make some fundamental choices about the breadth (number of categories) and depth (number of items in each category) of the products they must handle. Depending on the format, the number of categories can vary from 2 to 1000. For example, a specialized retailer can deal with 20/30 categories, a chain of 100/150 drugstores, a 200/250 supermarket, a 350/400 hypermarket, etc.
Each of these categories can be formatted from hundreds to thousands of items. Also, these categories are not identical and must have different marketing. Several disciplines are involved before the products are purchased by the consumer: replenishment, logistics, merchandising, operations in the premises, etc. Clearly, managing product lines is a complex task. What is the best way to handle products for a retailer?
Historically, retailers have managed products by grouping them into departments: hardlines, softlines, merchandise, dry or warehouse products, frozen, cold cuts, refrigerated, baked goods, agricultural, meats, etc. The structure of the organization was in functional line with the responsibility of the different sectors, with buyers for replenishment, with sales representatives for marketing, with distributors for the supply of products to the premises and with the operations sector for services. inside the premises. Information on profit, loss and assets were available only by department. As better data and analysis tools became available, it has been possible to deepen this analysis to the deepest level of categories, brands or SKUs.
There are several reasons why category level management is more effective:
The categories are made up of related products that tend to meet the similar needs and requirements of consumers. Therefore, categories are a logical common cause for both retailers and suppliers.
Consumers shop by category, and having all brands and products together makes it easier for them to shop. Retailers can offer in each section to each segment of consumers the type of product that best satisfies their need by category: premium, second brand, own brand, etc.
Departments are too large as business units, while individual brands or SKUs are too narrow.
It should be taken into account that the evolution of Category Management in the retail business is similar to the Brand Management of manufacturers. In Brand Management, product groups become the focal point to coordinate the different activities involved with the development, production and marketing of the product. Each of these product groups are driven, to think of themselves, as a distinct business unit with its own budget and its own profit and loss balance sheet. If a manufacturer has more than one brand in a category it would be desirable for all brand groups to report to a Category Manager to maximize efficiency. Similarly, in retailing, Category Groups become the focal point for Product Management.
However, there is a clear difference. Since there are a large number of categories involved, a Category Manager in a retail business especially manages several categories (say 5 to ten), while the Brand Manager is responsible for only one Brand.
Category Management represents a significant and proven opportunity to achieve substantial business improvements throughout the entire value chain - for customers, distributors and suppliers. However, this clearly requires a link with corporate strategies to be successful. To be successful, Retail Top Management must understand the strategic implications and potential contribution of Category Management, recognizing the scope of the changes required and personally lead their respective organizations through implementation.
