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Oct 12, 2023

How effective category management can benefit retailers

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By focusing on their category management strategy, retailers and brands can not only meet the needs of customers in a better way but also maximize profitability and shopper satisfaction

By Aakriti Virmani

What immediately catches your eye upon entering a supermarket? It's the store's elegantly lined display shelves and well-assorted racks and baskets – all aligned neatly in geometric precision to appeal to our eyes and aesthetics.

For any supermarket or hypermarket, the biggest challenge is to get the customer inside the store and induce her into making a purchase. If a store is successful at attracting a large number of customer footfalls and coaxing the visitors to shop for products, it's a tribute to the shop's adroitness in category management.

Category management is among the most critical elements of running front-end supermarket operations. In essence, category management is an art or science to arouse shoppers’ buying instincts. Supermarkets that are able to exploit and leverage their category management skills invariably attract customers and fulfil their needs in a way that looks like a well-oiled exercise in cultivating customer relations.

Category management also acts as a via-medium for brand owners to interact with retailers and end consumers. It also provides the language, process framework, and metrics for communicating all strategic and tactical recommendations to the retailer.

Besides, it helps brands and retailers to meet the needs of the consumer in a better way by deciding on the points of optimization like pricing, shelving, and assortment, among other things, all of which help to maximize profitability and shopper satisfaction. By employing a strong category management strategy, brands and retailers can judge and evaluate consumer buying patterns and market trends besides gaining a sharpened focus on the entire product range.

We are all familiar with the beautiful arches and shelves at supermarkets or hypermarkets that are specially designed to grab the eyeballs of the consumer. Product categories are arranged and assorted in a creative way to catch the passing attention of the consumer as well as cater to her needs. For example, a breakfast basket assortment could be made of different product categories like bread, butter, jam, oats, cereals and beverages that could easily suffice the wholesome breakfast requirements of the consumer as well as boost the sales of the lower-selling categories that remain on shelves and are not picked up by anybody.

"One needs to clearly enunciate the USP of their business model and whether a retailer is more focused on offering alluring deals or invested in offering a quality product range. Till the distinction is not clearly set up, it is difficult to achieve success in any model. One needs to understand a significant business philosophy that it is not possible please one and all," said Satish N Thaker, director, FMCG brand management, Elasticrun.

Therefore, ‘‘a retailer needs to target, measure, review and reflect on the category management strategy, in order to achieve the desired results," said Chandramouli Venkatesan, director of the adhesive brand Fevicol.

Unleashing the power of creative shopping

Another way to grab the attention of consumers is to adopt a creative shopping approach. Retailers can deploy their internal team of creative strategists, designers, writers, and data experts to collaborate with brand owners and run effective campaigns that push the boundaries of creativity and showcase products both offline and online.

"An average Indian spends at least 5 hours on mobile phones every day and as per recent data, there are about 500 million phones in the country. So, there is an opportunity of 2,500 million hours per day for the retail business to boost,’’ points out Thaker.

As impossible as that number may seem, the probability for retailers to interact with the target audience is not that poor. There is a list of apps and websites through which retailers and brand owners can target their audience. Some of them are already quite familiar like Facebook, Instagram, and WhatsApp.

‘‘The launch of 4-G and 5-G telecom operations has changed the entire business landscape. India is the cheapest market for data, which has not only fuelled business operations but also helped other economic domains like education, transportation and logistics. E-commerce has become an industry in itself,’’ noted Thaker.

"There is also the creation of a start-up ecosystem around the country. For instance, there are actually more than 150 start-up ecosystems around electric mobility in Pune alone," he added.

People these days also indulge in creative and indulgence shopping. So, while it is important for brands and retailers to keep a close eye on their customers’ buying behaviour, there is no guarantee that a customer will come back to buy the same product again. Therefore, it is necessary to keep a hawk's eye on the inventory. One needs to keep a regular check on the available items and products in the store before deciding to stock fresh products.

Playing with pricing

Moreover, it is important to understand that in most cases ‘price is everything’ for the consumer. An increasing number of consumers are opting for value-conscious shopping where they are paying more attention to the cost per piece or the cost per kilogram. So, for example, if a person is buying a pack of 12 diapers, he is likely to be more conscious of the cost per diaper and it is this calculus that will weigh on his purchasing decision. Of course, consumers are also conscious of the quality provided by the retailer or brand.

Not only have customers become more value-conscious, but they are also less willing to believe the sales pitch of retailers and brand owners. A popular trend these days is about customers doing their own research to grab the various deals and discounts available online or offline for a particular product before purchasing it. Therefore, it has become essential for retailers and brand owners to be up to date with market trends and competition in order to sell their products.

Retailers also need to provide better information about products to their customers. For instance, they need to inform customers if a product is organic, made in India, convertible, reusable, or can be customized to the likes and needs of the customer. Customers, typically, are willing to pay a premium price for such products and it also helps to reduce the retailer's dependence on discounts and offers.

Based on the panel discussion ‘FMCG Category Management in Semi-Urban India’ at India Food Forum 2022.