Merchandising Philosophy Part 2: Category Management

Chapter 14Developing Merchandise Plans RETAIL MANAGEMENT:A STRATEGICAPPROACH

1AgendaAdministrativeRetail Institutions DebriefNewswatch Assignment OverviewDiscuss Merchandising PhilosophyIntroductory conceptsCategory ManagementManufacturers go online

2Whats Happening in Retail?Sears to sell 4 locationsHMV finally gets into digital apps3MerchandisingActivities involved in acquiring particular goods and/or services and making them available at the places, times, and prices and in the quantities that enable a retailer to reach its goals.4Sets the guiding principles for all the merchandise decisions that a retailer makesShould reflect:Target market desiresMarketplace positioningRetailers institutional typeDefined value chainSupplier capabilitiesCostsCompetitorsProduct trendsMerchandising Philosophy

Does JC Penneys move to a store-within-a-store concept with Joe Fresh reflect all of these things?5Scope of ResponsibilityMerchandising view

All buying and selling functions

AssortmentsAdvertising PricingPoint-of-sale displaysEmployee utilizationPersonal selling approachesBuying view

Buyers manage buying functionsIn-store personnel manage other functionsAssortmentsPoint-of-sale displaysEmployee utilizationPersonal selling approaches6Merchandising v. Store Management Career Tracks at Hbc

7Two Merchandising StrategiesRetailer adjusts shelf-space allocations to respond to customer and other differences among local marketsCross-merchandisingRetailers carry complementary goods and services to encourage shoppers to buy moreMicromerchandisingIs cross-merchandising different from scrambled merchandising?8Scrambled Merchandising

9Build-A-Bear Workshopwww.buildabear.com

10Choose me

11Hear Me

12Stuff me

13Stuff me

14Fluff me

15Dress me

16Name Me

17Build-a-bear WorkshopTarget MarketPositioningDescribe BABWs merchandising plan18Merchandising Plans

Build-a-Bear Plan

Look at positioning map based upon assortment

19Build-A-Bear Assortment

20Retail Assortment Strategies

EXAMPLES??

21Examples?

Wide and deep department store; discount department storeWide and shallow home hardware?; 5 to a dollar; larger convenience (Macs; 7-11; needs)Narrow and deep most specialists (Sephora; Build a Bear)Narrow and shallow convenience (corner stores; vending machines;)Forecasting - Types of MerchandiseNecessary to distinguish b/w types of merchandise when forecasting:Staple merchandise (i.e. Bearemy)Assortment merchandiseFashion merchandise (clothing)Seasonal merchandise (Christmas, Halloween, Easter)Fad merchandise22Staple - AssortmentFashionSeasonalFad

Planning Merchandise InnovativenessYour text lists a variety of factors retailers need to consider w.r.t. merchandise innovativenessCustomer considerationsTarget market conservative or innovative?What segments exist?Responsiveness to their needsFashion trend demand (vertical/horizontal)Competitive considerationsOperations considerationsAmount of investmentGrowth potentialProfitabilityRiskImpact on imageTrade-offs (de-listing older merchandise)

Be aware of the products life cycle23Structured Guidelines for Pruning ProductsSelect items for possible elimination on the basis of declining sales, prices, and profits, appearance of substitutesGather and analyze detailed financial and other data (such as core customer preferences) about these itemsConsider nondeletion strategies such as cutting costs, revising promotion efforts, adjusting pricesAfter making a deletion decision, do not overlook timing, parts and servicing, inventory, and holdover demand24Brands - Merchandise QualityThe battle of the brands p. 366

Private(dealer or store)Manufacturer(national)Generic

25Loblaws Switch and Save: http://www.presidentschoice.ca/LCLOnline/newsArticle.jsp?newsArticleId=lcloa46003&type=details

Harvard:http://hbr.org/1996/01/brands-versus-private-labels/ar/1

Sunripe Private Label StrategyDescribe Sunripes Retail Strategy Mix.What is Sunripes Retail Value Proposition?Describe Sunripes merchandising plan.Describe Sunripes private label products. What are the advantages and disadvantages of private label products generally?Describe the private label buyer generally.How important are private labels to the Sunripe customer?What should Sunripe do to leverage its private labels and continue to grow its business?26Figure 14.9 Retail Assortment Strategies

27Private Label ProductsAdvantages

ControlProfit margins higherCompetitive differentiationCan generate loyalty (quality dependent)

Disadvantages

Lower brand equity/awarenessPerceived lower qualityNo manufacturer promotional supportDo not drive traffic as well as national brands28What is Category Management?A Retailer/Supplier process of managing categories as strategic business units, producing enhanced business results by focusing on consumer valueCategory Management is a Process and involves a series of interrelated activitiesCategory Management is comprised of distinctly different supplier and retailer components and cannot be done alone by eitherCategory Management has been shown to lead to improved business results and improved relationships between trading partners29Retailer & ManufacturerCategory PlanningImplementationCategory Management PracticesCategory ManagementRetailerDevelops Store-Level Marketing PlansManufacturerDevelops Marketing Plans and Programs for BrandsImplementationTraditional Business Practices30A New Way of Doing BusinessBrand/SKU ManagementRetailer Focused TacticsDeal-Based Decision MakingReactive Business PlanningAdversarial Work ProcessCategory/Brand/SKU ManagementConsumer Focused TacticsData-Based Decision MakingProactive Business PlanningCollaborative Work ProcessOLDNEW31Purpose: To point out the difference between how business used to be conducted and how it should be conducted under Category Management.Detail:The big change is the focus on category vs. brands. Retailers dont care about brands unless its success is directly tied to category success. Need to broaden focus to category level, to do what is best for the category. This is a fundamental change in the supplier business and it has implications on marketing and internal processes. Marketing is usually slowest to come around to a category focus.Consumer focused strategies is another big change, moving away from retailer-focused tactics. Five years ago the consumer didnt really enter the discussion. For a retailer this is new. This change is primarily driven by fear of losing customers to other channels.Other important changes include the move to 12 month proactive Category Business Plans from planning next months ads, away from deal-based decision making to data-based decision making and towards collaborative work processes from adversarial relationships.When it comes to Collaborative Relationships, their importance is not always obvious. But when considering the changing environment, what is it that suppliers have that retailers need? Consumer data and research.Figure 14.13 Applying Category Management

32Shelf Logic: Software for Category Management Planning

33Category CaptainsWhat is a Category Captain?an appointed lead supplier who carries out the category review and leads the process to deliver the plan for the total Category

The Category Captain must:have a demonstrable knowledge of customer insight and market understandingtake an objective approach to growing the overall categoryrecognize the role of other suppliers in delivering the goalNon-captains?34Retailwire April 29, 2004 (www.retailwire.com)What To Do When You're Not The Category CaptainBy Al McClain

At the recent VNU Consumer 360 Conference, Ed Gamarano of Kellogg's and Steve Kapinus of Spectra discussed some problems inherent in a system that emphasizes the category leader over all other players and what can be done to improve it.According to the speakers, while all manufacturers have some good consumer insights, the category captain supplier generally works with the retailer on category definition, role, assessment, score carding, tactics, and consumer insights. The secondary players are brought into the process as validators, which makes it difficult because many important decisions have already been made. So, the goal for non-category captains is to:leverage their category and consumer knowledge, identify the upside opportunity of reviewing the category with the retailer before the formal review process and provide an enlightened recommendation based on the retailer's issues.Manufacturers go onlineWould you ever buy a consumer product online? Why or why not?Probably in rare instancesMost of these products are consumables that are considered convenience purchasesTheres an immediacy Consider shipping costsWill this venture be successful?If the goal is to apply some pressure in the supply chain, then possiblyIf the goal is to move a majority of the manufacturers business online, then noRetailers still create significant place value35http://www.emarketer.com/Article.aspx?R=1008889

Consumer Products Brands Maintain Multichannel Harmony

MARCH 8, 2012

Direct-to-consumer selling complements retail Traditionally, retailers have been the middlemen between consumers and brand manufacturers, but these roles are becoming more fluid with the rise of ecommerce. Consumer goods companies have started selling to shoppers through direct online channels, and in the process are gaining access to valuable market research data.In an IDC survey from June 2011, a majority of North American consumer goods executives said their companies were selling directly to consumers in some form. Distributing through third-party websites like Alice.com was the most popular approach, and more than a third were also selling through their own sites.The trend toward selling direct online was further illustrated in an October 2011 Economist Intelligence Unit survey of consumer products executives worldwide. Twenty-nine percent of respondents companies total sales were attributed to their own websites, social media sites or direct-to-consumer third-party sites. However, the largest amount of sales were still coming from retail partners (41%).Even though they are expanding channels, most consumer brands are being careful to avoid conflict with their established retail partners. Fewer than 10% of those surveyed saw themselves as battling with retailers other brands or private labels. Many saw themselves as collaborating with retailers (41%), and nearly a quarter saw themselves as taking a two-pronged approachbranching into direct selling while simultaneously sticking with retailers.For many CPG brands, gaining consumer insights is an important additional benefit of direct sales. Sixty-one percent cited purchase data as the most valuable type of consumer insight, and it is a metric that is much easier to obtain when a brand is handling its own ecommerce. The future still lies with retailers, though; consumer products executives predicted the largest share of their sales over the next three years (40%) would come from retail partners, just one percentage point lower than the current breakdown. Consumer products brands may be stepping up their game in terms of ecommerce and social initiatives, but, based on the data, they won't be stepping on any retailers toes in the process.2012 eMarketer Inc. All rights reserved. www.emarketer.com

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