Retail Category Management 101
Retailers and manufacturers often have divergent profit objectives. Manufacturers want to maximize the profits of their brand. Retailers, on the other hand, want profit maximization of the entire product category. In spite of these apparently conflicting objectives, both manufacturers’ and retailers’ profit margins can be increased through cooperation rather than confrontation. Category management is one such cooperative strategy. This involves the appointment of a leading manufacturer as the “category captain.”
The category captain advises the retailer on the best way to price, display, and promote products in a category. Category management is a term describing methods and processes involved in managing retail operations. As defined by the Federal Trade Commission (FTC) Staff Report on Slotting Allowances, category management is an “organizational approach in which the management of a retail store is broken down into categories of like products.”
It provides the opportunity for the relationship between retailer and supplier to become a more collaborative nature with more openness and information sharing. Under category management, decisions about product selection, placement, promotion, and pricing are made on a category-to-category basis with maximizing the profit margin as a whole. Categories are managed strategically through category plans and roles.
In retail category management, a category is loosely defined as a group of mutually substitutable items. For instance, Crest or Sparkliwhite can be used to clean one’s teeth. Since both products are mutually substitutable, both can be included in the category “toothpastes.” However, such broad categories often do not tell the whole story. For example, electric toothbrushes are sometimes included in the “electric grooming” category, which may well include non-substitutable products such as hair dryers.
The scope of categories retail management recruiters use may likewise differ from retailer to retailer. For instance, while one retailer would consider “corned beef” to be a category on its own, another retailer may place it as a mere sub-segment of the broader category of “canned goods.” Understanding your category definition is the key to success. You will also need to learn how to map categories into consumer category maps.
Since category management often involves marketing activities, the category manager/captain may also work in Field Marketing, merchandising, point of sale displays, and stock checking among others. Promotional activity is also an area in which recruiters Toronto companies can trust are expected to be involved when doing retail category management.
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