Data drives category management, and the bigger the company, the better the data.
While an abundance of syndicated scan information has made most health and beauty care segments the equal of food in category management, general merchandise — with the exception of prominent sections like batteries and lighting — is lagging the industry.
Not coincidentally, the HBC field is comprised of large companies as big or bigger than the food giants. Some, like Unilever and Procter & Gamble, operate in both realms. While large manufacturers populate the battery and lighting businesses, most of general merchandise is made up of small companies that can't or won't spend for the data and research needed for effective category management, industry executives told SN.
Among the other factors that challenge nonfood executives in performing category management: slow-turning products, proliferating new items and a higher number of stockkeeping units than on the food side of the store. Seasonal and in-and-out programs bring their own difficulties.
Category management in nonfood “has come a long way,” said Charles Yahn, vice president of sales, retail development, customer service and pharmacy, Associated Wholesalers Inc., Robesonia, Pa. Yahn and other wholesalers and retailers were interviewed during a recent conference of the Global Market Development Center, Colorado Springs.
“In HBC, it's easy because you've got uniform products and uniform UPCs, so you can track data better. Category management is about data and history. If you're coming out of the new general merchandise product every year, or a seasonal in-and-out product, you're not going to have the data or the history that you have on the others. So it makes the category management tougher,” Yahn said.
“We've made some strides on category management and the information available, but I think we still have a ways to go to catch up with our grocery counterparts,” said Anthea Jones, group vice president, center store, Bi-Lo, Mauldin, S.C., who was recently promoted from a nonfood post.
The data for GM still is “not as robust and insightful” as other areas. “In HBC, we get some good category information and some good category insights. So my hopes and wishes are that as we progress, we're able to get more data on the nonfood categories,” Jones said.
A HIGH PRIORITY
The “2007 Category Management Industry Study” from Cannondale Associates, Wilton, Conn., reflects the priority HBC manufacturers have given category management. Ranking category management “extremely” or “very” important were 89% of HBC manufacturers, 84% of food companies, but only 75% of GM suppliers. In a previous study, Cannondale found that 86% of grocery retailers rated category management “extremely” or “very” important, higher than any other channel.
“There are some pretty big HBC companies with a lot of clout,” said Don Stuart, managing director, Cannondale. “In GM you have a lot of less sophisticated, smaller players, and a lot of the retail channels they deal with are not data rich” like supermarkets.
The potential for category management in GM was demonstrated in the study, he noted. Asked about the average dollar sales growth attributed to specific category management initiatives, GM manufacturers reported 13%, food companies 13% and HBC suppliers 7%.
“A smart GM manufacturer can be the one-eyed man in the valley of the blind,” Stuart said. “They've got something more than anyone else, whether it is shopper insights or whatever stick they are wielding. So they can be relatively attractive to retailers and drive good returns.”
For smaller companies, other types of research besides syndicated scan data can fuel category management, said Paul Thompson, a partner in the Dallas office of Chicago-based Henry Rak Consulting Partners.
“Some behavioral and attitudinal information could go a long way in helping drive that shopping experience and making it more meaningful,” he said. Assortment, placement and pricing are also critical, relative to the retail channel, he said.
“All retailers are not only demanding more category management, they are demanding more shopper insights — a better understanding of their shoppers, how to get them in the store, and how to increase their conversion once they are in the store,” Stuart said.
The first step for any retailer is to get a good idea of what their category objectives are, said Eric Togneri, Atlanta-based principal of CPG CatNet, San Antonio, a trade association for category management practitioners.
“Get your objectives down tight, communicate them early and often to your suppliers, and when suppliers come with plans that aren't completely in line with helping you achieve those objectives, make them go back to the drawing board and come back with the right plans,” Togneri said.
Category management techniques, and understanding the shopper, can help retailers understand how to merchandise certain aisles to make them more consumer friendly, Thompson said. For example, “the baby care aisle may include strollers, car seats, diapers and formula, integrating a set of HBC, GM and grocery products that targets parents of infants. These solutions can only be accomplished with a strong understanding of the consumer provided by the manufacturer, integrated with shopping behavior provided by the retailer,” he said.
Retailers can compensate for the lack of syndicated information in GM categories by tapping their own scan data, said Bill Mansfield, president and chief executive officer, VIP International, Garland, Texas, a former nonfood executive who is now a consultant.
“Clearly, the smaller chains that are not supported from a manufacturing position have a disadvantage. However, as long as they are scanning the product and have some ability within their internal systems to measure the sales by store, by cluster, by demographic group, and how those sales compare to other categories, I think they can do a limited version of category management themselves,” he said. Whether they have sufficient staff to process that information and turn that into sales growth via planogram revisions is another question, Mansfield added.
“GM is more fragmented than HBC,” said Al Jones, senior vice president, procurement and merchandising, Imperial Distributors, Auburn, Mass. “There are many smaller companies and a lot of them don't have the same capabilities as a P&G, Unilever or Colgate-Palmolive on the HBC side of the business. Those companies drive category management. They are the category captains; when a retailer goes to do a review, they have a category captain and it's typically those manufacturers.”
Using large companies as category captains to do most of the category management work for a retailer is less than ideal, but unavoidable, said a nonfood executive with a Texas retailer. “It is the nature of the beast,” he said.
“Very few companies are going to give you 100% true category management without skewing it in their favor somehow.” That's not entirely a negative, he added. “If they're going to do the work up front, they're going to want to see some of the benefits in the end result.”
Single-vendor categories, like lighting, lead to greater collaboration, said Larry Ishii, general manager, GM/HBC, Unified Grocers, Commerce, Calif.
“On the general merchandise side, if you're in a situation where you have a primary vendor for light bulbs, brooms and mops, or kitchen gadgets, then that's pretty easy to do. But when you're in a multiple vendor type category like stationery, it's a little bit harder because those vendors don't have that same kind of wherewithal. So the food side does have an advantage in that respect,” Ishii said.