The Category Management Playbook
Ten tools every retailer needs to build the best stores
Step 5: Supplier Evaluation
Most retailers are quick to evaluate a supplier when something goes wrong, says Wade, but less frequently do they enact a regular evaluation program to ensure vendors are delivering on their needs.
Supplier Evaluations should include metrics for:
- Innovation—how the supplier is feeding the new-product pipeline;
- Consumer knowledge;
- Strength of offers;
- Brand and individual sales trends;
- The type and quality of information and tools the supplier is providing the retailer.
The Supplier Evaluation standardizes this practice and should certainly be shared with the respective vendor so the company can better serve the retailer. Wade recommends undergoing this step annually.
Step 6: Vendor Line Review
While the Supplier Evaluation (No. 5) is meant for the retailer to present to the supplier, the Vendor Line Review is a document that the vendor must provide the retailer to summarize category performance.
Often, says Wade, if a retailer isn’t proactive in what he or she requires from the Vendor Line Review, it becomes a tool for the supplier to pitch new items.
“The line review tends to be a selling doc instead of an analytical doc,” he says. “The retailer should have a standardized document that they send to the vendor to say, ‘This is what I expect you to bring to me when you bring a line review.’ ”
Vendor Line Reviews should include the following metrics:
- Which segments are growing and declining?
- Which vendors are growing and declining?
- Why those segments/vendors are growing and declining?
- What new items are seeing big gains?
- What’s going on in the rest of the country that’s applicable to the retailer?
- What other retailers are doing things that are really unique and different?
Step 7: Vendor New Item Presentation
A great amount of energy and resources are put toward new-product rollouts. Unfortunately, says Wade, not nearly enough is put toward following through to ensure the product doesn’t end up collecting dust in a retailer’s back room—or simply cannibalizing sales from other items.
The CMA recommends retailers create a standard list of questions to ask suppliers when presented with a new product. Likewise, suppliers should be prepared to provide the following information in detail:
- What segment of the category is it in? How big is the segment? Is it growing? What was the share of the last item introduced into this segment? What kind of market share does the item need to attain to reach the claimed volume levels?
- What is this item’s point of difference? What makes this product stand out from similar items?
- To which shopper segment does this item appeal? Who will buy this item? When, and why?
- How much incremental volume will it generate? Will it simply replace volume from another item, or does it appeal to a different shopper need?
- What’s the effect on total category profit? Does this item increase gross margin dollars? Does it source volume from lower gross-margin-dollar items? What is the profit model for the category with this new item?
- What is the introductory marketing effort? What happened the last time you introduced an item into the category? What was the marketing support, and what results did it generate?