5 Category-Management Tips for 2018
By Angel Abcede on Oct. 15, 2018LAS VEGAS– Of all the convenience-retail sciences that operators have to master, category management seems to tie everything in the store together—but it also eludes many time-strapped operators, according to panelists at a 2018 NACS Show workshop.
Understanding how new products, promotions and plan-o-grams interact can make or break the bottom line. To help retailers along, two industry veterans, Casey McKenzie, senior principal and consultant for Impact 21, Lexington, Ky., and John Zikias, executive adviser for Holmes Oil Co. Inc., Chapel Hill, N.C., offered several best practices to about 200 attendees at the educational session “Category Management: How to Manage Every Category.”
Here’s what they brought up …
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Quick start
McKenzie said the go-to rule for retailers should be to identify the top three to five most important categories (by volume, profitability, traffic drivers or whatever else a retailer prioritizes) and focus on them. The so-called “80/20” rule—or 20% of categories account for 80% of the business—may sound trite, but it’s an important baseline to start with, he said.
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3 strategies
McKenzie offered three basic strategies:
- Pair high-traffic items with high-profit ones. Focus on traffic-building categories—the most frequently visited areas of the store—and pair those areas with high-profit items. This strategy puts higher-margin items in front of the most customers. “Gone are the days of hunt and find,” he said, referring to a strategy of forcing people to search for highly desired items as a way to get them to shop longer (and possibly buy more).
- Positioning, product and presentation are crucial. How and where retailers place and display items in the store are important ways to increase basket size, McKenzie said. One of the cardinal sins is allowing product to stay in the back room, out of sight of customers, where they definitely won’t move.
- Train employees on how to execute in the stores, influence consumer-buying decisions and suggest they buy more.
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Look for help
A category manager doesn’t have to do everything, Zikias said. Often suppliers can offer help, based on information they have. An example is “gap analysis” data, which can show a retailer is carrying only two of the five best-selling items in a category—something a supplier would know.
But Zikias also said some suppliers will push items just to get space in the store, and some provide the same items to all the chains they supply, not allowing for retailer exclusivity. In many instances, he said, suppliers have to build trust with retailers so they both can meet their goals.
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Buy-downs?
With regard to manufacturer discounts or buy-downs, retailers will always do better selling a product than taking money for placing a product that ultimately won’t move, Zikias said. “Focus on customer demand,” he said. “In some cases, you’ll make exceptions. You have to put it into your equation.”
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Be wary of fads
Fad items can be tricky, Zikias said. Once a trend is over, demand will quickly evaporate. “That last shipment always wipes out the profit you [originally] made,” he said.
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