The paper 'The Concept of Category Management' is a wonderful example of a business case study. Retail business is one of the leading industries in the world. It constitutes the final step in the distribution of merchandise, therefore acting as an intermediary between consumers and the manufacturers. In the past decade, the retail industry has undergone tremendous changes with the attempts to provide more value for products while optimizing sales volume and profitability (McLaughlin, E & Gerard, 1995). There has been a major shift from traditional brand management to a more holistic approach referred to as Category management (CM) CM is a retailer-supplier collaborative process of managing categories of products as strategic business units (Dussart, 1998).
Another widely adopted industry definition is that CM is a consumer-centered, data-based process of making business decisions on product mix, merchandising, pricing, and shelving (McLaughlin, 1995). The concept involves grouping discrete groups of similar or related products into categories which consumers would ideally want to find together in a store. It is based on consumers’ view that some product categories are interrelated or substitutable and possibly, they would interchange such products in meeting their needs (Aastrup, et al, 2007; Aastrup, et al. , 2008).
As a result, a greater assortment of product categories from which consumers can choose is highly imperative. Retailers focus on the assortment of interrelated products into categories to improve the performance of whole product categories unlike the traditional focus on individual brands. Product categories are defined based on the consumer’ s needs and purchasing habits. This way, retailers and manufacturer enhances business results by focusing on delivering consumer value. The concept of category management came into practice in the 1990s (McLaughlin, E & Gerard, 1995).
Its conception was marked by the widespread acceptance of the broad-based Efficient Consumer Response (ECR) initiatives. The movement advocated CM as a core discipline in its attempts to align trading Partners and streamline the supply chains. The Grocery Manufacturers of America (GMA) industry association, led by the ECR movement established CM “ best practices” , the guidelines which have highly impacted on retail business management. Although CM is not without its drawbacks, its adoption has led to demonstrable, positive results that justify retailers’ invested time and resources.
According to a 1995 survey conducted by Cornell University (McLaughlin, E & Gerard, 1995), retailers and wholesalers who adopted CM had increased revenues from 4 to 5% with subsequent years reaching as high as 6 to 7%. CM practices led to cost savings, sales increases, and increased product turnover. Table 1 below shows the estimated impacts of CM on retail and wholesale investments in the US according to a study contacted by Cornell University in 1995. In this discussion, I will establish CM’ s contribution to retail business productivity and growth while safeguarding customer interests. TCM involves segmenting a retail enterprise into independent business units.
Managing discrete groups of products as business units has significant benefits for a retailer in terms of profitability and cutting down operational costs. For instance, some products may require the same market intelligence such as similar sourcing strategies and distributor relationship management strategies (Aastrup, et al. , 2007). Since CM links consumer requirements with supply market capabilities, when retailers identify supplier capabilities that match their customer requirements, they can work with those suppliers to provide value for their customers.
This is because supply management strategies are highly influenced by product categories and consumer needs and expectations.
Aastrup, J., Grant, D.B. & Bjerre, M, 2007, ‘Value creation and category management throughretailer-supplier relationships’, International Review of Retail, Distribution and Consumer Research,17 (5), 523-541.
Aastrup, J., Kotzab, H., Grant, D.B., Teller, C. & Bjerre, M, 2008, ‘A model for structuring efficient consumer response measures’, International Journal of Retail & Distribution Management,36 (8), 590-606.
ACNielsen, Al H, 2012, Consumer-Centric Category Management: How to Increase Profits by Managing categories based on consumer needs.New York: John Wiley & Sons.
Basuroy, S. and Walters, R., 2001, “The Impact of Category Management on Retail Prices and Performance: Theory and Evidence,” Journal of Marketing, 65 (October), 16-32.
Chiplunkar, R. M, 2011, Product Category Management: retail education. New York: Tata McGraw-Hill Education.
Dussart, C., 1998, ‘Category management: strengths, limits and developments’, European Management Journal, 16 (1), 50-62.
Dirk, J M, & Schramm-Klein, H, 2008, Strategic Retail Management: Text and International Cases.Springer.
McLaughlin, E W and Gerard F, 1995, Category management current status and future outlook. New York: Cornell University.