space and Category Management must become strategic and data – led
Estimate your Value Creation
Driving maximum value, through data-centric space and category management improves the customer experience, profit margins and de-risks supply chain shocks
Space and category optimisation
Space and Category optimisation is strategically important. As retail organisations navigate the continued supply chain disruptions of the 2020s, data-driven retail space and category management will enable organisations to meet customer expectations, respond to macroeconomic issues, processes and increase profits.
the multichannel economy
Across every market, there have many shocks to the supply chain. To some degree, these shocks are set to continue. In today’s multichannel economy, retailers stock through multiple channels. This is a constant balancing act as they attempt to please customers, control costs and support colleagues and delivery teams. In a multichannel environment, strategic space and category optimisation is critical – but sadly often under-used.
creating a Robust Approach
Retailers with a robust approach to category management build customer loyalty. Retaining customers increases profits across the business, which is vital in a fiercely competitive market. But retaining customers is hard:. customers expect a perfect multichannel experience with a wide range of products, at a value and personalisation level that suits their individual needs. And customers increasingly expect price transparency and improved product sustainability. Retail category management and space optimisation has to balance all of this.
creating insightful data
With insightful data, retailers are able to connect their operating model directly to the customer and product categories., And find business efficiencies, through an operating model that benefits both the retailer and colleagues.
effective use of data
Effective use of data is vital for retail category management to be strategic in the modern multichannel organisation. Modern data technologies give retailers a massive opportunity to really make the right decisions. This analysis goes to a depth simply not possible in the past. These insights can be applied to product availability local, national or international sourcing. And then linked to the customer and their preferred channel. In other words, it links directly between the buy, supply and sell pillars of retail.
cutting through complexity
Given the demands on the organisation, data can enable the business to be agile and adjust its strategy and category management to cope with changes in demand by channel, or in response to issues. This requires the organisation to have good data management, to ensure that all parts of the business can work confidently from the data sources available to them. Data-driven category management cuts through complexity. It unlocks agility, as well as increased consistency and personalisation in the service to customers. The business can exploit faster and cheaper processes – and ultimately deliver increased profits.
Remaining customer centric
Organisations are struggling to remain customer-centric under the impact of inflation, rising transport costs and workforce shortages. Data-driven retail, with its insight into product categories, helps retailers to change the lines they carry and the price points.
Profit and growth
Where necessary, it can ensure that substitutes lead to profit and possible growth in market share; a situation that is currently rare. At present, too many retailers rely on price controls when data insights could highlight different ways to manage disruptions or changes in demand.
Redefining the roles
Redefining the role of space and category management as strategic can turn it into a profit centre that can grow business margin. With a customer focus, effective volume management, product range and merchandising drives efficiency. Moving to a data-centric approach calls for an iterative process so that means modern category management meets the business priorities. This allows the change in processes to be delivered in different stages.
product orientated but strategic
It is true that, retail category management must be product-oriented, but strategic category management also has a strong focus on the bottom line. With the data available, it is focused both broadly and deeply on the business impact that category management can have, including channel fees, incentives, marketing programmes, payment schedules, product offerings and that ever-present supply chain.
understanding the process
This means that strategic space and category managers are a different beast from someone with just a strong understanding of the buying process; they are analytical and commercial and, therefore, able to ensure category management is strategic.
the future of category management
Category management’s future state in retail is, closely tied to the business’ overall outcomes. Research suggests a one per cent improvement in the cost of goods sold increases EBITDA (earning before interest, taxes, depreciation, and amortisation) by more than 18% on average. That future state will see category management collaborate more closely with peers across the business to jointly drive up sales growth and profit margins.
As with all business transformations, this is not a simple journey. Tessiant is here to help. Our people have been there before, and by listening intently, we can provide direction and propose the best way to break down and prioritise activities, so that the benefit land in stages. We have experience with both ‘the what’ (category review, space & assortment execution etc) and ‘the how’ (process, capability, system, ways of working reviews, optimisation etc) Everything we do is practical and results orientated.
Extending our capabilities
We extend these capabilities through the partnerships we have built, to offer clients a more complete transformation service, combining business transformation with digital, data and technology.
