CATEGORY MANAGEMENT CALLED A LONG HAUL

AMITY K. MOORE

CHICAGO -- Though it's easy to get caught up in looking at the impressive statistics coming out of category management programs, retailers starting the process must remember that category management is a long-term effort, warns Brian Harris, chairman of Partnering Group, Playa Del Rey, Calif.

"A whole plan is never less than two years," Harris said while speaking here at a seminar during the Food Marketing Institute's annual convention. "Two years is even sort of a push," he added.

While retailers have to look past the numbers achieved by retailers and wholesalers who have implemented category management programs, those numbers can be quite impressive.

Typically, Harris said, retailers and wholesalers practicing category management are seeing sales gains of 6.4%, reductions of stockkeeping units of 7.1%, reductions in retail level inventories by 5.3%, and increases of 2.2 points in their overall gross margins.

To show how category management affects specific categories, Harris shared results from two plans: soft beverages and laundry detergent. In the soft beverages category, the retailer's sales revenues increased 11%, with inventory down 8% and the net profit increasing 144%. Laundry detergent performed at a 27% sales gain with a 27% net profit increase.

Harris presented a basic four-step formula for retailers looking to begin their own category management program.

First, a company must assess its capabilities. From that assessment, a two-year plan should be developed.

The second phase focuses on infrastructure development and assigning roles to the categories. "You have to be clear, relatively clear up front, what categories are going to be the key destination categories," Harris said. "Phase two is basically layering in some building blocks for category management."

Phase three is the period during which management selects partners for business category plans, conducts training and begins pilot testing of category management software.

"In the next phase [phase four], we recommend people step back and begin to fine-tune things," Harris said. "This is sort of a transition, take a breath, lock in the pieces," he added. In the final phase, Harris suggested, management should conduct quarterly progress monitoring.