Connecting SKU level detail with a big picture strategy

Retailers live or die by the assortment, so it is crucial that strong category management processes are in place. However, from working with retailers across sectors (from grocery to electronics), we know that there are several challenges in achieving success:

• Connecting the assortment to the value proposition: The assortment must be a translation of the retailer’s chosen value proposition, its differentiation strategy and overall brand. However, often there is a lack of alignment or agreement internally on this value proposition or the strategic roles of categories, meaning that decisions further down the chain become divergent.
• Accounting for customer needs by store: Different stores will attract different consumers, perhaps as a result of geography or store location. Without a clear understanding of how to segment and cluster stores by customer need, it can lead to an inefficient distribution of stock.
• Over-reliance on qualitative criteria: Qualitative choices and intuition must be balanced with more technical criteria such as performance indicators, otherwise there is a risk of bias, subjectivity and ‘personality’ leading decisions.
• Data management: With high volumes of SKUs, it can be difficult to track, manage and draw insights from such a large pool of data in a way that facilitates decision-making.
• Multifunctional alignment: The impact of category management goes beyond the commercial team and so it is necessary to involve the buyers, logistics, finance etc. to guarantee all areas are pulling in the same direction.
• Individualistic actions undermining the overall strategy: It may be the case that a commercial team member’s bonus is decided based on meeting sales targets. In this circumstance, they are likely to fight tooth and nail to secure and protect a large floor area, even if it may be better utilized by another category owner.

Failure to address these issues can result in a number of negative effects such as:

• High levels of stock or stockouts
• Stagnant revenue and sales
• Dropping profitability

We help our clients design and implement a best-in-class category management process, training staff to apply the methodology and adapt to future challenges.

Redesigning the approach to assortment requires a combination of technical analysis and experience in the field. We have delivered more than 130 successful projects in retail, across sectors and geographies. We understand the fast, challenging and practical dynamics of retail and bring together our Marketing & Sales knowledge with our data science teams to tackle the large data sets inherent in this challenge.

Our projects typically pass through the below phases in order to deliver a customized and effective solution.

During this process we work closely with your commercial team (and the rest of your organization) to support you to:

• Understand the brand positioning and assortment of key competitors
• Define and align your strategic goals, differentiators and positioning
• Translate strategic drivers into an assortment which suits your specific context
• Review the product hierarchy* to improve the assortment decision process
• Define the strategic role of each category to support your positioning
• Define the optimal assortment per store, based on real performance indicators
• Set execution standards per category to maximize in-store experience

*e.g. Hierarchy may be based on product type (tables, chairs…) or by occasion (dinner, cooking…)

• Improve brand equity: define the assortment that will support you in meeting customer demands
• Increase sales: through better alignment between products and consumer needs
• Increase profitability: through better management of the product margin and sales productivity
• Reduce complexity: set clear boundaries through segmentation
• Greater visibility and precision to act: monitor performance at SKU level and make precise corrective adjustments based on real world performance
• Reduce stockouts and overstock: reduce excess inventory or OOS events through better management of assortment per store
• Improve retailer relationships: demonstrate commitment through matching assortment to retailer brand positioning
• Support the differentiation from competitors: clarity on the categories and products which can deliver differentiation from the competition

Delivering a learning journey for your team as well as a technical solution.

We believe there is no value at all in building a complex book or tool to guide category management. The real value is in the construction together, with the client team, understanding their specific reality and embedding it in the solution.

A category management project with Integration involves a lot of interaction with a multifunctional team. Something that is very important in building a good technical solution, but also in making sure the client’s team is able to implement and move on with the project after the design phase is finished.