INDIANAPOLIS -- Category management has sprouted in supermarket floral, using methods already rooted in other fresh departments, according to an industry research consultant.
Ten years ago, the same questions, fears and unknowns were part of the introduction of category management in fresh produce departments, said Steve Lutz, executive vice president of The Perishables Group, based in E. Wenatchee, Wash. But now produce section leaders know how many mangoes they sold and when and how that compares to sales of tomatillos.
Lutz defined category management as the "continuous process of capturing and organizing retail data for the purpose of understanding and documenting performance. Retail scan results are then aligned with consumer purchase information or triggers to develop overall category plan. The goal is to develop specific department- and item-level action plans that deliver optimal category performance."
The process must help answer these questions:
How does the consumer shop the supermarket floral department?
Do I have the right floral mix, in the right stores, at the right time, at the right price?
How do we maximize our non-holiday sales?
Are there opportunities to grow sales?
How effective are promotions?
How are we priced? Have we built in price tiers?
Is space effectively allocated?
Would a secondary display add incremental sales?
Category management is one of the lessons the retailing industry has learned from Wal-Mart and the introduction of its Supercenters. "Wal-Mart is changing the face of retailing and forcing other retailers to do the same," Lutz said.
The pace of change is constant in the food business as the market becomes even more consumer-driven, according to Lutz. In floral, consolidation, the growth of information technology, global marketing, item proliferation and emerging industry leaders rank as the key trends.
Leaders no longer will be fixated on data that tells them where they have been and misses where they are going. Leadership companies will understand that the best decisions come with blending consumer information and the knowledge of suppliers and cost-based marketing, Lutz said.
The result is a new business model for the floral business. Under this new performance-based structure, retailers will rely on information technology as they examine items on their ability to carry their own weight.
"Is it making money?" Lutz asked, and if it is, "Is it the best product to do so?" For instance, the floral department sells so many four-inch pots of plants that they represent 25% of the volume. However, the volume generates only 5% of sales, which means there may be other products that would carry a bigger payoff.
The analysis doesn't stop with the retailer. Suppliers also have to prove that the products they are selling to stores make money. And they need to provide more extensive after-sale support to retailers who are looking for key partners who are able to document the performance of their products, help with business planning and realize consumer drivers.
The "what do you have and what's the price... leave the retailing to me" attitude is no longer the model, Lutz said.
Many suppliers and retailers have effective technical systems that are top-notch, and by partnering, they are able to leverage the product research into better bottom lines for both. Category management is the process to use in examining what retailers and suppliers need to do to develop and maximize sales, he added.
The challenge is to make sure category management is integrated into a retailer's total business plan. Category management frequently is treated as a separate project, Lutz noted. Instead, it should should be a blueprint for product sourcing and handling, and for assortment, pricing, promotional and merchandising plans.
"It is the foundation for a true supplier/retailer partnership," Lutz said.
Consumers are key to the category development process. Consumer research helps retailers offer the right product mix for particular segments of the shopping public, optimizes event spending and results, determines the price that drives profits and develops the right merchandising setup that fits with how customers shop the floral department, he said.
In the floral category, the challenges are:
Retailers are just getting started with the process.
There is no standardized category hierarchy.
Access to data is limited.
Little experience in category management.
Lack of activity by industry organizations and associations.
However, the floral category managers should not feel too overwhelmed.
"It was the same in the produce industry 10 years ago," Lutz said. "The challenges will be overcome and overcome faster than it took produce because of the experiences in the deli, dairy and meat departments."