Philippines Hosting 2015 Asia Pacific Retailers Convention

We do have hardworking retailing leaders that works hard to catapult the Philippines at par and always ready to showcase our best for the world to see. 

THE Philippines won the right to host again the Asia-Pacific Retailers Convention and Exhibition (APRCE) in 2015, the same event that placed the country on the global retail radar when Manila hosted it 22 years ago.

The Philippine Retailers Association (PRA), the country’s largest organization of retailers and suppliers/service providers and the prime movers in the retail industry, recently announced that it won the bid to bring the gathering of the region’s retail industry leaders to the country for the second time during the Heads of Delegations (HOD) meeting of the Federation of Asia Pacific Retailers Association (FAPRA).

FAPRA is the regional organization of retailers composed of 17 member-countries, including the Philippines, Singapore, Indonesia, Thailand, Hong Kong, Malaysia, Vietnam, Australia, New Zealand, Japan, South Korea, Taiwan, China, Mongolia, Turkey, Fiji and India

With Southeast Asia becoming a borderless single market by 2015. The Philippines hosting the APRCE is a perfect showcase of what our local retailers can offer the international market.  APRCE is the longest-running regional retail conference and expo in the Asia-Pacific region.

The event will run from September 30 to October 2, 2015 at the SMX Convention Center.  Registration is open just sign up at twww.2015aprcemanila.com.ph

SALE SALE SALE

All year round, we see this most recognized four-letter word, that conveys a very powerful message.  No need for any further explanation yet all of us know that it certainly means, a more affordable price goods to buy, more value for our money, big savings.

Being in the retail industry myself, I would like to emphasize the many facets, benefits of what this word means for both retailers and consumers.

Most customers are appealed towards the word "SALE" being displayed alongside merchandise/goods being sold, and have you observed that this is most often being displayed store-wide during special occasions such as Graduation Day, Summer season, Back to school, Halloween, Christmas and New Year are the major "Sale season" and there are the "Payday Sale", "End-of-Season Sale", "Holiday Sale", "Father's Day Sale", "Mother's Day Sale", "Grandparents Day Sale", "Anniversary Sale" to name a few.

There are also the departmental Sale : "Toy Sale", "Furniture Sale",  "Lingerie Sale", "Mens Wear Sale", "Appliance Sale" and many other category or brand sale.

As part of retail, the reason "Sale" is being implemented in-store is to draw the buying crowd, especially during payday, another reason is for retailers to be able to deplete their stock inventories to free up the retail shelves and turn them into cash to have more cash-flow to purchase new items to be sold in their stores. This is the avenue for most retailers, department store, business owners to make customers feel being active part of the exchange of goods for their money.Stores are more likely to place sale signs on items with higher unit volumes.  Unit volumes vary across products.

Store sale sign and price strategies are entirely endogenous in the model, as is the impact of sale signs on demand.  Demand increases for products with sale signs because customers believe these products are less likely to be available in the future.

As for profit margins : stores are more likely to place sale signs on items with higher profit margins.  The shift in demand upon use of a sale sign can lead to higher prices and also higher unit volumes.

The effectiveness of sale signs by arguing that they inform customers about which products have relatively low prices, thus helping customers decide whether to purchase now, visit another store or perhaps return to the same store in the future.

Sale signs makes the consumers aware of price-markdown, big discounts that may translate to perceived big saving also increase demand for products.  The apparent effectiveness of this simple strategy is surprising; sale signs are inexpensive to produce.

On the part of the consumers, they most often have limited or incomplete idea of the true value of the products being put on sale, they may not have any hint if these are over-stocks, for depletion or are priced with higher margins.  The main point why customers are drawn towards "Sale" is their notion that they can find good deals of what they have wanted to buy in the past but limited due to the regular pricing, or they have the perceived savings to be made, this also hasten their decision-making in the urgency to immediately purchase even if the product does not immediately pose a need for the consumer.

In summary, its a win-win for the customers, if the retailers put on sale their premium and regular items that are not at all over-stocked or slow-selling, if its being offered all across product stock keeping units(SKU) and not just on the selected items that they deemed to be old stocks or non moving items.  For the consumers, they also would be giving the much needed help by buying the products put on sale be it discounted or full-markdown priced.  Since this will entail the business to have more cash-flow to buy new merchandise to put on display for their future shopping pleasure.

Strategic Sourcing

The ground on which retail and consumer goods sourcing organizations have long been based has shifted in recent years, the result of competitive and regulatory changes, rising costs, and the Internet, which brings issues of quality and working conditions to the attention of end users around the world in near real time.

It is a landscape rich with opportunity. Sourcing organizations that develop the key capabilities needed to leverage such opportunity will position themselves and their companies for success well into the future.

A SHIFTING LANDSCAPE

There have been a number of changes that, taken together, have fundamentally altered the sourcing organization landscape. Among them are:

Shift from deflation to inflation. For much of the aughts, the levels of personal consumption and cost were headed in opposite directions, with the first moving higher, while the second fell or stayed flat. Then in 2011, costs started to spike, but expenditures remained relatively unchanged. Now that the days of deflation are over, suppliers, producers and retailers need to adjust to the “new normal.” 

Proliferation of sourcing location options. There is no one country poised to become the “next China.” As such, picking an effective sourcing base now requires advanced macroeconomic forecasting that takes into account everything from political turmoil to currency changes to infrastructure development.

Vendor base consolidation. After the global credit crunch forced the shuttering of many factories, leading consumer products companies began establishing long-term relationships with vertically integrated manufacturers that provide production capabilities and a full range of services across multiple countries.

Increase in regulations. Product-related regulations have become more complex and stringent in recent years and are increasingly particular not just to countries, but also to cities and states. Consider California’s Proposition 65, which requires companies to notify the public about potentially harmful chemicals in the products they purchase.

Near-real-time consumer awareness of quality issues and working conditions. The Internet, which has further sped up the 24-hour news cycle and added to the mix social media and online reviews, has made it virtually impossible to contain issues of poor quality or subpar working conditions, as a leading retailer’s recall of its yoga pants and the devastating factory fires in Bangladesh made clear.

THE NEW SOURCING ORGANIZATION

In light of the 21st-century challenges facing sourcing organizations, we have identified nine capabilities necessary for success, and arranged them by category: strategy, supply base and speed.

Strategy

The first and most critical step is for organizations to accurately assess how closely their sourcing and overall business strategies align with one another. In the process, they need to identify those areas in which they can independently excel and those in which they need to seek the help of partners.

1. Sourcing location: An effective sourcing location strategy should take into account the following factors:

• Macroeconomic: Labor climate, political stability, currency movements, energy rates, raw material availability, duties, regulations and country competencies
• Consumer: Costing or pricing strategy, order quantities, product classifications, merchandising strategy, quality requirements, lead times, and calendars
• Market: Retail sales, future-season orders, unemployment rates and trade regulations
• Vendor skills: Financial stability, factory locations, production capabilities, capacities, raw material supply base and product lead times
• Internal: Capabilities and needs, financial investments in overseas offices
• Cost: Not just the buying price, but the total cost, which often includes hidden expenditures before, during and after sourcing
• Service level: How fast the sourcing organization can get products from the sourcing base to a brand’s DC
• Speed: How quickly the products can reach consumers and how agile the sourcing organization is in responding to changes in demand

Special mention needs to be made of near-shoring, or bringing manufacturing closer to home. The reduction in cycle times and money saved on transportation and labor costs have prompted retailers from Target to The Children’s Place to Zara to near-shore a portion of their manufacturing, while most brands continue to task Asia-based suppliers with handling full orders should the initial sample sell well.

Consumer products manufacturers are near-shoring as well. For example, GE, by near-shoring its GeoSpring water heater, has been able to drop the price from $1,599 to $1,299 on lower material and shipping costs and fewer labor hours. Meanwhile, it’s been able to increase the GeoSpring’s quality and energy efficiency and to slash the time needed to incorporate design updates from five weeks to mere minutes.

2. Operating model/organizational structure. When deciding what should be insourced and what should be contracted to outside vendors, the leading practice is to invest in improving capabilities that are necessary for supporting the core business strategy and outsource those that are more transactional in nature or for which the company has limited competence.

The operating model should also take into account what should be handled centrally and what should be decentralized. For example, in addition to merchandising and sourcing, Dick’s Sporting Goods uses its overseas sourcing team to contract out support services that include compliance and quality testing. PVH uses its overseas offices for fit and color approval, fabric management, quality, and production management, all of which contribute to shorter cycle times, while Carter’s has handed over supplier evaluation and verification to its local sourcing offices, believing that it’s the people on the ground who are most familiar with local vendors’ capabilities.

3. Innovation. The ability to identify and commercialize new ideas—whether in the form of materials, construction, production or product use—is crucial for success in the 21st century. Doing so requires that the sourcing organization be structured and measured to support innovation, with the ability to both identify and enable the development of new concepts.

To be sure, few organizations can turn truly cutting-edge ideas into market-ready solutions using just internal resources; forging strong relationships with external partners, including vendors that have demonstrated a commitment to innovation as well as academic institutions, is often necessary.

With that in mind, Hanesbrands in 2009 signeda joint development agreement with Naturally Advanced Technologies to commercialize a cost-effective and environmentally sensitive alternative to cotton, a proprietary flax-based fiber created using NAT’s CRAiLAR® technology. In 2011, the two inked a 10-year supply deal for the fiber.

Supply Base

Sourcing organizations must actively work to establish and maintain partner relationships and be vigilant about ensuring their partners’ reliability and effectiveness.

4. Supplier relationship management (SRM). Companies with a strong SRM program in place can yield substantially greater cost savings than companies with lackluster SRM programs or none at all: one to two basis points per year, on average. Within three to five years, such savings create a significant gap between top and bottom performers.

When building SRM programs, there are four key areas of focus:

• Stratification: Tiering the supplier base to prioritize and manage supplier relationships according to strategic importance
• Collaboration: Creating continuous improvement programs to strengthen supplier capabilities and performance of joint activities
• Evaluation: Defining metrics to evaluate supplier performance
• Governance: Developing clearly defined roles and responsibilities, both internally and externally, and defining cadence to prioritize and track progress

Companies serious about enhancing their SRM efforts develop Lean manufacturing models, diversify production locations, strengthen just-in-time replenishment and implement defined initiatives to lower cost, boost productivity and improve responsiveness across the nodes that make up the end-to-end value chain.

5. Supplier compliance. The increasing number and complexity of regulatory requirements—coupled with heightened consumer awareness of any missteps—mean it’s more important than ever to have good visibility into supplier compliance. However, it goes both ways: Branded wholesalers need to make sure their retail partners are the right ones too.

Such deep understanding and mutual trust can be established by way of transparent data sharing, facilitated by a team of key players that represent distribution, merchandising, inventory control and auditing and who are tasked with reviewing all aspects of compliance policies and procedures, including making recommendations and implementing improvements.

The benefit of vendor compliance is twofold: It not only helps to reduce the amount of time spent handling supplier glitches and improving overall product quality, but it also lessens the chance of negative press, which these days can be virtually impossible to contain.

6. Supplier risk. The scope of potential supplier risk is vast: It can include everything from a supplier’s financial health to its ability to respond to service requirements in a timely and effective manner to potential work stoppages—even natural disasters. To minimize risk, sourcing organizations need to first identify it, then proactively address it.

The best way to identify risk is to use a scorecard or something equivalent on which suppliers’ performance across risk categories is assessed and then assigned a rating. Doing so will yield a comparative snapshot of supplier risk in one central location and, in the process, bring to light the areas where risk mitigation strategies need to be put into place.

Speed

Neither a good strategy nor a properly managed supply base will be effective without the ability to get product to market quickly and effectively.

7. Local sourcing and vertical integration. When it comes to speed, perhaps the best example is Zara and its dual supply chain, which sees its most trend-dependent items produced locally to reduce lead times, while basics are produced more cheaply in Asia. Elsewhere, Carter’s has cut its lead times to 105 days (versus an industry average of 144) by making sure all negotiations are concluded before purchase orders are issued.

In grocery, Whole Foods has developed strong networks of local farmers to cut lead times for perishable products, an approach that also helps reduce the chance of product shortfalls.

8. Multi-echelon inventory. Another way to improve speed and boost sales is to manage inventory at multiple locations in the supply chain. Such an effort requires close collaboration between the retailer and manufacturer across the supply chain, and upstream, between the manufacturer and its suppliers.

Gap, for example, purchased several years’ worth of the unique denim used in Old Navy’s Rockstar jeans line in an effort to reduce costs. Through close collaboration with the mill, it was able to provide daily updates on color, quantity and size, filling out the pipeline more accurately and boosting average unit retail.

9. Sustainability and product compliance. Adhering to product safety and labor regulations and developing products with the environment in mind not only engenders goodwill with customers and reduces costs, it also decreases risk and, as a result, helps organizations get their products to more markets without delay. VF’s restricted substance list, for example, lets it make products that can be sold in any country around the globe.

H&M takes it a step further: It’s the world’s largest buyer of certified organic cotton and features a Conscious Collection made of sustainable materials and an in-store clothing recycling center. Its secret is working with highly rated suppliers (53% of production is carried out by first- or second-tier suppliers) that are more attuned than most to environmental and labor performance.

And Green Mountain Coffee Roasters (GMCR) invests heavily in the farm communities from which it sources coffee beans; it funded more than 75 supply chain projects in 14 countries in 2012 alone.

The number of changes that sourcing organizations have had to contend with in recent years is unprecedented, and there are undoubtedly more on the way. But sourcing organizations that are armed with the capabilities that support their strategy, effectively leverage their supply base and ensure that speed is at the core of all their operations will not just survive in such a dynamic environment, they will thrive.

Importance of Retail Merchandising

For a business to make sales, its products and services should be visible and displayed in an appealing manner, a process referred to as merchandising. Merchandising includes product display and packaging, as well as all the advertising techniques used to promote and sell goods to consumers.

Increases Traffic

Good merchandising drives visitors to your store. An attractive exterior influences a customer's decision to come inside and do business. Brightly colored sales signs, a well-kept structure and a clean, well-organized parking lot are some factors that encourage customers to come into your store.

Increases Sales

Effective merchandising has a significant positive impact on sales. Pricing, proper product display, packaging, promotional marketing and sales signs can shoot sales upwards and give the customers a memorable shopping experience. Customers are more likely to return in the future if they find your store attractive and well organized.

Builds Loyalty

Customers are more likely to return to a store that offers top quality products in a customer-friendly and easy-to-access setting. Offering fresh product arrangements in appealing displays entices shoppers to return frequently, building long-term loyal customer relationships.

Better Space Management

Good merchandising involves the proper arrangement of aisles, display fixtures, shelves and the entire layout of the retail space. Efficient space management creates usable space that accommodates more people and makes the whole shopping process a pleasant experience. If space is efficiently managed, there may not be need to renovate or expand the existing retail space.

Retailers, Consumer, Big Data Transforming Category Management

For the past 20 years, category management has been embraced by consumer packaged goods (CPG) brand owners and retailers alike for its ability to increase profitability. The discipline provides the primary platform for CPG companies to communicate strategic and tactical category recommendations to retailers. Real Results magazine spoke with Gordon Wade, managing partner and director of best practices of the Category Management Association (CMA), about some of the recent trends that have the potential to transform the category management discipline.

What trends are causing CPG brand owners to focus more on the category management process as a means to drive growth?

There are several trends in the CPG marketing ecosystem that are increasing the importance of category-based thinking. First, the retailer's control of the shopper's experience at the shelf is growing, while traditional brandbuilding tools and brand equity is declining. Retail buyers want to hear how a CPG brand is going to help grow the category or its margins. Second, it is becoming more important to market directly to the shopper. Just as retail buyers think in terms of categories, shoppers think in terms of need satisfaction at the category level. For instance, a consumer's shopping list is more likely to include category needs (e.g., detergent or cookies) instead of brands (e.g., Tide or Nabisco). Today's consumers are less brand loyal, and instead use e-commerce and mobile technology to find the best deal. Finally, big data — gathered from sources such as loyalty cards, social media interactions and shopping-related apps — offers promising results for those who can harness insights from it and apply it to the category management process.

Shoppers are more empowered today than ever before. Modern retailing offers them a myriad of ways to purchase a product — whether it's online, through a brick-and-mortar store, or via a mobile device. How is this affecting the traditional approach to category management?

With more choices than ever before, shoppers no longer rely on one retail format to meet all of their disparate needs. As such, retailers are seeing volume and profit leak from their categories. One way retailers are gaining insight into which categories are being impacted is by analyzing their loyalty card data. Given these category disruptions, CPG companies can add a lot of value to retailers by presenting shopper insights about how they can help drive category growth. It also opens the door for CPG manufacturers to collaborate with retailers on multi-category solutions to recapture some of the lost volume. For example, a food retailer might leverage its strength in healthy foods to sell volume in other categories such as foot care, blood monitoring devices and skincare by creating a multi-category solution for diabetic care.

How is big data impacting category management?

Big data is often used to describe the gigabytes of disparate data that can be gathered from multiple sources — such as point of sale, loyalty cards, customer feedback and social media interaction — that if analyzed properly could reveal valuable insights into shopper attitudes and behaviors. Yet, most CPG companies lack the analytical approach, software with predictive analytics, and trained analysts to extract meaningful conclusions and actionable insights from the data. Marketers that can determine how to harness disparate data sets of behavior — such as buying behavior, social media behavior, mass media consumption behavior and lifestyle behavior — to learn more about need states and behavior at the household level will be most successful. Data at the household level could then be rolled up into shopper segment insights and then into geographic store clusters. Those insights could also be applied to the supply chain to enhance forecasting and replenishment capabilities. It will take the collaboration of software designers, social media gurus, retailers and marketers to extract these types of shopper insights from big data, and then the marketers will need to determine how to leverage those insights to alter buying behaviors. Mastering big data is quite possibly the greatest marketing opportunity of this decade.

How can CPG companies determine where they fall on the category management curve?

The CMA has identified five stages on the category management maturity curve — embryonic, adopting, advancing, excelling and aspiring — based on a company's approach to data, analytics and software, organizational skills, and process and culture. For instance, a company in the embryonic stage may share limited geographic data with its retail partners, and work only with Microsoft tools, without using any analytics. A company in this stage of the maturity curve tends to view the retailer as the adversary and focuses on sales and trade-dollar analysis. However, companies in the advancing stage are more likely to leverage retail optimization tools to analyze data at the household level. For companies at this stage, at least half of their category management staff will have completed certification, and the company will be recognized as a captain in major accounts. The aspiring stage is what we envision as the realistic future of the category management discipline, where big data and predictive analytics are integrated across the value chain, driving planning and executional excellence. We are not there yet, but we believe it is possible.

For companies that want to get serious about category management, what resources should they consider?

First off, achieving category management mastery will require investments in personnel and software. A larger, better trained staff with access to advanced planning and analytics technology will be necessary to mine gigabytes of household-level data for insights, respond to retailers' demand for individual store assortments and manage a more complex supply chain.

Given that category management is dependent on other corporate functions such as marketing, product development and sales for its success, how can CPG companies calculate the return on investment (ROI) of their category management investments?

While calculating the cost of category management programs is simple, determining the sales revenue that can be directly attributable to the category management function is more challenging. Some companies try to capture the ROI based on calculating the value of attaining category captaincy, or the profitability of an account that has accepted a new item. Others attempt to quantify the value of a specific planogram option, or incremental account activity that can be attributed to insights derived from category management analysis. The CMA offers two additional alternatives — certification and benchmarking — as ways for companies to measure their category management functions against industry standards.

Online Web Merchandising

There is a growing community online especially on the daily use of social media such as twitter, facebook, google+, linkedin, instagram, and many other social networking sites than ever before.  We are seeing more and more people interacting with one another, truly a world without borders.

Selling products online allows you to automate your business process and potentially bring in sales, regardless of the time of day. Web merchandising is the process of marketing products on your website for sale. If you have a website, improving your Web merchandising has the potential to increase your sales and help you make more money.

Web Merchandising

In the retail world, merchandising is a major part of the success of businesses. How the product is displayed and shown to the customer has an impact on sales. In the online world, the way products and goods are displayed is just as important. Web merchandising deals with the way a product is laid out on your website. The area of merchandising could include the layout of the website, the pictures you use and the features you choose to highlight.

Navigation

In the area of Web merchandising, the navigation of your website is important. Customers need to be able to get around and see the various products that you have. For example, having a "View all" link so that your customers can easily see all of the products that you have for sale could be helpful. You also need to allow your customers to click on specific products and get more information. Dividing your products into different categories can help your customers easily find what they are looking for as well.

Features and Benefits

In Web merchandising, you also need to pay attention to how you list the features and benefits. Instead of only showing a picture of the item or device, also include prominent features and benefits that could be attractive to your target customer. For example, you may want to list one or two benefits of the product in bold with a different font or with highlighting around the words. This gets the attention of your customers and helps you increase sales.

Make It Easy to Buy

If you want to move merchandise online, you also need to focus on making it easy to buy. This typically includes putting a link to buy the product up near the top of the page and then once again after the description. For those who do not want to read all the details, put a buy link at the beginning. If a customer wants more information, the second link allows him to read about the product and then make a buying decision. Offer a payment processor that allows for a variety of payments to be accepted.

Merchandising and Retail Techniques

Merchandising is the arrangement of products in a physical or online store to maximize sales. The objective of merchandising is to close the sale after advertising campaigns bring customers into the store. Good merchandising frees up time, makes the selling process simpler, enhances the buying experience for consumers and drives sales growth.

Basic Techniques

Basic merchandising techniques include displaying related merchandise together, simple and clean displays, ample aisle space, well-stocked shelves and prominent featuring of promotional items. For example, a furniture store may create a mock living room with different pieces of furniture items and fixtures to generate sales in these products. Attractive floor displays of seasonal goods in high-traffic areas also drive higher sales and profits. The National Retail Hardware Association recommends storing slow-moving and low-priced items away from customers to encourage sales of high-margin items.

Enhancing the Appeal

The first impression is usually the most important one, which is why window displays in brick-and-mortar stores and landing-page layouts in e-commerce stores are so important. They grab customers' attention and bring them into the store, which is not a simple matter in a mall with dozens of retailers. A bakery may highlight its attractive cakes and chocolate creations, while a clothing retailer may display the most recent fashions in its window display. Proper use of lighting creates a mood and illuminates the merchandise, especially during peak holiday selling seasons.

Store Layout

The type of store usually dictates the floor and shelf layout. For example, grocery stores should have enough aisle space for shoppers to move their carts and accompanying toddlers around when they are doing their shopping. Retailers may often move items to the front of the shelves to avoid giving the impression of not having enough items on stock. Retail managers may use the sales-per-square-foot metric, which is the ratio of sales to total shelf and floor display space, to assess the effectiveness of a merchandising strategy and make the necessary adjustments.

Online Merchandising

E-commerce stores should have a simple layout and an effective search tool for customers to browse through the store effortlessly. Software has advanced to the point where a simple mouse rollover of an item activates a pop-up window displaying the product details and even multimedia demonstrations of how to use the product. Online merchandising techniques include cross-selling, which is the highlighting of related products in search results, making special promotions appear on every page and offering user-friendly electronic checkout facilities.

Other Techniques

End caps, which are the ends of store shelves, and power islands, which are free-standing displays strategically placed in high-traffic store areas, may draw attention to new and high-margin products. Taste testing, product demonstrations and how-to training sessions also highlight certain items and make the customer buying experience more enjoyable.

Modern Category Management

Traditional category management is an old concept in a brave new world. Retailers need a new solution as they enable the level of differentiation necessary to attract consumers with an ever-grow­ing number of shopping alternatives.

Merchants need a better way to create differenti­ated customer experiences, build solid category strategies, design compelling assortments, plan productive planograms, and efficiently price and promote to the market—and they need it now. Enabling all this will, in most of today’s retailers, require changes to processes tools and organiza­tional structures. It also means better connecting existing processes, and bringing together disparate parts of an organization like never before to deliver a seamless customer experience.

Today, successful category management encom­passes a broader set of capabilities than in the past, including: category role and strategy, macro space allocation, financial budgeting, assortment plan­ning, planogramming, price optimization, private brand development, promotion and event plan­ning, and joint business planning with vendors. In addition to an expanded functional footprint, the beginning and end of the processes a category manager needs to manage have expanded. Many are now defining this work as spanning from the initial development of the category strategy and role, through to the completed reset of the store shelf and online assortment. This is a much wider view of the world than what category management traditionally included, and creates a big part of the challenge.

Leading retailers are already planning for the changes and tools needed to integrate these capabilities and define new ways of planning and managing categories, and these efforts are paying dividends. Retailers such as Target, Kroger and Walmart have seen impressive results from re­vamping category management, including a 2% to 4% increase in sales, a 2% to 3% increase in margin and a 10% to 15% increase in inventory productivity.

But despite these positive efforts, most retailers remain stuck in the past, partially due to fatigue from traditional category management. And even those who have addressed parts of the issue would benefit from a more sophisticated approach. Leading retailers will invest in holistic changes to their processes, tools, organization and culture to enable a necessary shift in the way they plan and manage categories.

Tackling these historical inefficiencies and problems requires addressing seven key facets.

1. Real customer centricity—walk a mile in your customer’s shoes

Today, many retail organizations are far less customer-centric than they claim to be. But in the modern retailer-customer relationship, the customer holds all the cards, and the retailer can’t afford to be anything but hyper-attentive to her expectations. As a result, everyone throughout the organiza­tion—including everyone involved in the category management process—needs to have a laser focus on the consumer and her needs and wants at all times. Creating truly compelling products and customer experiences should be the common thread linking all parts of the organization and category management process.

Leading organizations are going about this in several ways. Some, like Hy-Vee and Lowe’s, are creating the position of chief customer officer to drive customer-focused improvements across channels and functional groups. Others are taking a closer look at loyalty and social media data to understand how their core customers shop their stores and identify opportunities to capture share by satisfying unmet needs. For example, consider a retailer who found that a key customer segment shopped only 20% of their basket with that retailer across four categories. By taking a customer-centric approach, the retailer was able to identify catego­ries in which the needs of that customer were going unmet and exploit that gap to increase basket ownership to 40% across 10 categories.

2. True integration—you’re probably not as integrated as you think

Highly siloed organizations—within functional groups and across channels—have led to processes choked by a series of handoffs and put category management, and ultimately the customer experi­ence, at risk of falling victim to a game of telephone. Given the breadth of processes that need to be successfully orchestrated to improve category management, handoffs must be effective and efficient. In other words, integration is key. This means removing handoffs wherever possible, and when not possible, ensuring everything is done to make them as smooth as possible. Process and organizational design can provide some relief here by carefully considering what can be lost in translation.

However, integrated systems are providing the biggest benefits in tackling these challenges. Software plat­forms have made significant gains in the past 10 years to expand the functionality required to span the gaps between planning, execution and functional areas. Traditional supply chain solutions now offer tools to plan space, assortments and financials, and conversely, planning suites are expanding into supply manage­ment. These tools have fundamentally changed how processes are executed and have made syncing data, timing and weighing tradeoffs much simpler. But they’re big, expensive and can stress organizations ill-equipped to manage this magnitude of change. Adoption is picking up, but slowly.

3. Strong category strategies—if it’s not strategic, it’s not a strategy

Today, many category strategies are lacking neces­sary consumer insights and are ultimately not linked back into the category management process in an efficient way. Developing a strong category strategy takes a well-crafted process in which a wide array of data inputs drive unique insights, which narrow in on a set of opportunities and thereby define required initiatives and potential benefits. The process should culmi­nate in a game plan for the category that defines the steps, required investments, and expected finan­cial or operational benefits. As category manage­ment has grown in breadth and sophistication, it has driven up the need for a robust go-to-market strategy the team can rally around and cascade across support teams. Successfully cascading category strategies starts with defining each category’s role within the portfo­lio. It’s also important to coordinate strategies and tactics related to assortment, pricing, promotions and placement across channels, and categories and functions and financial plans should be tied to category-level targets, providing a means for measuring success.

Throughout this wide array of processes—from financial budgeting to planogramming, in-store execution and marketing—it’s critical that the consumer can identify the strategy as it was intend­ed. For example, the value presented in a pricing strategy—competitiveness, brand consistency and value—needs to be aligned with the products that make up that product line—good, better, best. If these are disjointed, the value proposition is muddled, the customer will be confused, and the experience falls flat.

4. Clean, accurate data—it’s true what they say about garbage in

Retailers are awash in an ever-growing flood of data and information, but many are not positioned to use it to its fullest. For example, while most organizations have a data quality strategy in place, 94% suspect the data is inaccurate in some way, according to Experian. Accuracy is clearly a signifi­cant hurdle to many organizations’ abilities to harness analytics to drive decision making and improve the customer experience.

Getting the most out of all this data also means integrating it across the business, providing one version of the truth across integrated planning processes and connecting the dots across channels, categories and competitors to develop a true picture of the consumer’s needs and behavior. This includes a better understanding of past perfor­mance and consumer needs than currently exists for most retailers. Retailers who can achieve this soon will hold a tremendous competitive advantage, as only 37% of retailers currently have a contact data quality strategy in place that supports a single view of the customer, according to Experian.

5. Actionable insights—in the end, you have to do something

Ensuring the data is accurate and integrated is only half the battle—retailers are also challenged to derive actionable insights from that data and use it to drive smart decision making. Many organi­zations don’t devote enough time to this important exercise. As a rule of thumb, category manage­ment teams spend 80% of their time gathering and organizing data and only 20% of their time using it to develop actionable insights. Plus, insights are often supplier focused—as they provide much of the data—at the expense of the retailer’s customer experience and loyalty.

To really unlock value from their data, retailers first need to create a centralized analytics team that can identify and develop core insights for category teams. Secondly, these insights should be organized into three key categories—customers, clusters and channel; we call these lenses. The first lens, customers, prioritizes using data to figure out how to influence key customer segments. The second lens, clusters, focuses on harnessing demographic and consumer data to develop store clusters that require similar go-to-market strategies. Finally, the channel lens helps address the growing omnichannel challenge as click-and-collect and delivery models expand.

The key is to derive insights with an eye toward decision making and action. Organizing, funneling and interpreting data requires the correct structure and people to make it work efficiently.

6. Localization and personalization—how will you manage expanding complexity?

One of the industry’s biggest mandates is develop­ing personalized and pervasive relationships with customers across channels—one-to-one retailing. Consumers expect to be recognized and treated as individuals, and those expectations are spurring significant changes to all aspects of retail opera­tions. Modern category management is tasked with “assorting to the individual,” whether that’s an individual consumer or an individual store. Localized and customized pricing is the first push for many retailers, including Target, Kroger and Staples, which recently made news with its sophisticated pricing system that changes online pricing based on a customer’s proximity to competitors’ stores.

But this focus on granularity will also drive other changes. In assortment planning it will mean a continued evolution from national to regional to store-level, and finally, to individually curated assortments and experiences across channels. In space management, retailers will need to switch from a “one-size-fits-all” standardized approach to a store-level approach that’s flexible enough to allow localized adjacencies and shelf and product arrangements. And of course, marketing, promo­tions and pricing will change as well, as all move from a market-based approach to one that’s highly dynamic and individualized. These shifts will mean an exponential increase in complexity as increas­ingly granular decisions need to be made across more and more stores, customers, channels, func­tional areas and processes. While tools and systems will relieve the burden of computational work and coordinating decisions, this increasing granularity will require a significant redesign of key processes and organizations.

7. Clear roadmap—manage and measure progress

Of course, fixing so many problems won’t be a cinch, and benefits require investment. The neces­sary changes span many processes and organiza­tional silos—and we’ve seen that one cannot be optimized without making improvements to another. Additionally, modern category management can add operational complexity that will need to be supported by enablers such as new process, tools and organizational structures. (See Exhibit 1.)

Organizations that are able to successfully trans­form their category management processes will start with a clear vision, multiyear roadmap, and consensus and commitment among key leaders across functions. The new approach to category management will also require new tools—with considerable data needs—and new processes and organizational change, both of which come with significant cultural implications. Starting small will help prove out the value opportunities, while a focus on change management will ensure that new ways of thinking take root. Finally, focusing on set­ting and measuring key metrics helps demonstrate benefits and build accountability and ownership.

Although it’s not easy, transforming category man­agement is quickly becoming necessary. As more and more retailers start to address bits and pieces of the issue—78% of retailers plan to revamp their category management processes, according to RSR— those who pull it off now will be well positioned for what the future holds. Meanwhile, those who stand still run the risk of watching their customers jump ship for retailers who are proactively improving their category management capabilities to be more cus­tomer-focused, integrated and analytically driven.

CASE STUDY: HOLISTIC CATEGORY MANAGEMENT

Issue: A large, multiregional North American grocer struggled with flat or declining sales for several years—the result of a hypercompetitive market, rising supply chain costs and intense margin pressure from a heavy reliance on discounts and promotions.

Solution: The grocer built customer-centric clusters based on key demographic data to inform localized assortments and implemented leading assortment planning capabilities to build these assortments. They also established a robust and easily repeatable category strategy development process supported by robust analytics. Finally, a new space planning organization and tools helped the retailer build better planograms optimized to inventory turns.

Result: Sales increased 2% to 4% for pilot categories across stores, and that was with only 10% to 15% of each cluster’s assortment differentiated from the core assortment.