Category Management Principles and Processes

Overview

Category management can be defined as mutual constant procedure between producers and retailers to manage product categories as strategic business units, producing improved business outcomes by concentrating on providing value to customers. It is important concept related to retail buying and merchandising. With regards to this, retail can be refereed as sale of products and services from Tesco store to its final users. The retailers can be refereed as component of supply chain. Tesco buys products in ample quantity directly from producers and then offer them in smaller quantity to customers for earning revenue. Therefore, the organization follows modern retailing which enable it to purchase products from manufacturers and offering them directly to consumers. On the other hand, merchandising is important concept related to boosting the sales of products at the cited retail store. For this aspect, Tesco assures that products are showcased in such a manner that it drives interest of consumers to make an immediate purchase. Therefore, the entity strongly focus on physical appearance of store such as, displaying the products properly in shelves, using mannequin to showcase apparels etc. It also helps in generating awareness about wide range of products that are offered by brand.

Key principles and processes of category management

It can be stated that category management is founding stone for ensuring smooth operations of the retail organizations. It facilitates the retail corporations to make purchase in bulk quantity and manage category of products as strategic business units to satisfy customer requirements. The retail organization implements the main principles of category management in core areas to facilitate overall business strategy.

There are five major principles that are considered by Tesco as well as other retailers in UK. The explanation of which is as follows:

Cross functional team approach

It means groups of individuals with various types of operational expertise working towards a mutual goal. It involves customers, marketing personnel, employees handling operation as well as human resource department. They collectively help in specifying category, quantity of product that must be offered performance criteria etc. They further help in determining sourcing strategy for business. Strategic sourcing is way that helps business in using varied tools and techniques to optimally source products according to the needs of the consumers.

Strong supply market knowledge

In order to meet the needs of customers in best manner, the organization ensures proper availability of products aligned with needs of buyers, demand of quality and quantity of offerings etc. Such as, with the increase in demand of organic food, fermented groceries, majority of retailers have started supplying the same.

Change management

It is important approach that help business in assuring flexible operations so as align with changing preference of customers. With the help of change management, Tesco has initiated a significant change by providing products through online stores. With this aspect, enterprises can support their efforts through performance benchmarking. In addition to this aspect, effective strategy can be developed to support change.

Process rigor

It is important principle that enables the organization in incorporating defined processes and techniques to facilitate category management and furnish top quality products to customers. With the help of this concept, maximum customers stimulate the products offered by the retailers. Further, company also assures that proper relationship is maintained with supplier so they it can provide prime quality offerings to entity. The suppliers present in market must be identified and evaluated by the retail entities. Thereafter, the one providing right quality of products at right price must be selected.

Capability development

To facilitate effective categorization, it is important for retail entities to develop skills and abilities of its human inventory. With this principle, organization tends to develop high performing teams by providing training and development, giving them learning via internet sources, virtual classrooms etc.

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Implementation

It is concluding step where principles to support category management are implemented within business using team support, program management etc. After implementation process, the performance is measured and compared against desired outcomes. Also, benefits from these principles are tracked to assure higher financial results.

Furthermore, to support category management within business, retailers can follow eight step processes.

The description of which are as follows:

Defining the category

These aspects help the business in deciding products which must be included and offered to customers and the products which should be excluded.

Defining role category

It is further based on preference of retailer regarding the role that they wish the category to perform within their store. The category role involve, destination, routine, occasional and convenience. The destination category helps the retailer in positioning themselves at the most favorable spot of customers. The routine category enable the entity to categorize the products daily used by buyers such as soap, shampoo, tooth paste, face cream etc. While, seasonal category involve products that are demanded in particular season like, ice cream in summers.

Category appraisal

This step helps company in determining performance of category at the store, within the market and across various retail stores. This step further involves various functions like, pricing the offering, promotion etc. The main objective of this step is to determine whether to continue current category categorization. Also the category requires extra efforts to enhance revenue of business.

Category scorecard

This step helps company in establishing goals for each category. It involves the strategic assignment of task that should be performed to attain category goals.

Category strategy

The well defined plan of actions; strategy are used to facilitate category role to attain scorecard objectives. The strategy are prepared to boost the sales, enhance market share and amend gross profit and increase customer satisfaction level etc.

Category tactics

It refers to particular actions that can be taken to attain selected category strategy. It helps in ascertaining the optimum category assortment, selecting pricing and promotion strategy etc to facilitate attainment of overall strategic goals.

Implementation of plan

It is important step which helps the retailers in changing developed strategies and tactics into reality. It further assists them in determining the work that must be performed, when, where and by whom.

Category revision

It involves monitoring performance of category and comparing with the desired results. On the basis of the analysis, the significant actions are taken or changes are done.

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A strategic perspective

There are wide range of strategies that are used by retailers at present to meet needs of customers and boost sales of products and services offered by them. Being a global retailer, Tesco ensure adoption of appropriate strategy, so as to maintain competitive position. Further, with the help of proper strategy, cited company can stay ahead of its rivals and thus maximize its productivity as well as profitability. The organization develops its strategy considering the vision, mission and core purpose of business. The vision of the company is to widen the scope of business and become extremely valued among consumers, societies in which they function and among loyal and competent human inventory. The mission of entity is to maximize value of its shareholders and become continuously growing company. Further, core purpose of entity is to develop value for consumers to earn their lifetime loyalty. At present, Tesco has adopted multi channel strategy which enables the brand to provide services through various channels so as to target maximum possible customers. Therefore, brand provides its services through both physical as well as online stores.

Presently, there are total 6814 stores of the brand around the world. Further, to boost its sales and enhance the convenience to buyers, Tesco has divided its functions in home country into different formats, distinguished by size and categories of the products sold. They are Tesco superstore, metro; express, extra, one stop. Therefore, the superstores of brand can be regarded as modular big size supermarket, majorly offering groceries, fruits and limited non food products as compared to extra stores. Further, Tesco Metro is another type of stores situated in the heart of the city; prime locations to provide comfort to buyers. Thereafter, Tesco Express are another type of stores which mainly emphasize on providing food products like, chocolate, sweet, biscuit etc. Further, the Tesco extra is another type of category of retail store that enable brand to provide all types of product range. One stop is another store which is very small in size offering basic non food products, groceries etc. On the other hand; the brand has also started its operations through online channel. The corporations have started providing online grocery with new concept of “click and collect”'. This has enhanced convenience and satisfaction among buyers as they can easily avail services within their comfort zone.

Similarly, there are other retail organizations that use contrasting strategies to maintain their leading position. Such as, Lidl is among the largest retailer of the globe and it has adopted discounting strategy. Therefore, hard discounts are given by entity in all its nations, so as to develop a new kind of supermarkets. It provides sales on both national as well as private labels with 10 and 90%. It provides 1621 products in range which facilitate more choices to customers. Thereafter, another discount retailer Aldi, focuses on providing prime quality products at incredibly reduced prices. The organization has adopted an effective product strategy for carrying a modest range of fast moving products. Aldi is specialized in selling staple offerings like, eatables, beverage and household supplies it’s also carries limited range of products with 700 contrasting products only. Further, Sainsbury is recognized as the largest grocery store which have adopted a viable strategy; mid low model pricing strategy. With this strategy, brand has cut down the prices of around 12000 products in past 18 months. By keeping the affordable prices of its products, company is able to boost sales of its offering. The overall strategic perspective of Sainsbury is based on the vision of brand to become the most trustworthy retailer where individuals love to work and customer prefer to shop. Furthermore, the organization uses these strategies to not only maintain its competitive position but also enhance its productivity and profitability. These entities ensure there is proper availability of products in right quantity, quality at right location on right time. In addition to this aspect, proper merchandising is ensured to induce customers buy more and more products and boost the sales of the business.

Describing the role of the buyer in retail

The buyers play a vital role in retail organizations. In retail industry, buyers are the individuals who choose what type of products must be stored based on current trends, preference of customers etc. Thy further play an important role in assuring the sales of product by using sales and other types of promotion. The buyers in retail industry are also known as merchandise buyer. Therefore, the role of merchandise buyers is to determine products which must be offered to customers, the quantity of products that must be purchased from suppliers. Therefore, they assist business in inventory management. Merchandise buyers further help in determining supplier which must be selected from the retail organizations to meet needs of business in best manner. Thereafter, they also negotiate with suppliers regarding prices and conditions of delivery etc. Merchandise buyers also assist in deciding the prices at which the product must be offered to customers on the basis of their market knowledge.

Further, buyer play a key role of forecasting future demand of product and the price at which offering can be sold. With the help of this aspect, proper quantity of products is made available to customers within the retail store. Retail buyers help business in responding with the changes in demand and distribution. In addition to this, it also assures the need, preference of consumers is focused while operating. Also, they resolve the complaints of customers and take feedback from them regarding the products offered in the outlet. Merchandise buyer also plays an important role in maintaining quality of products within the outlet by using various quality control tools etc. The retail buyer have major function in maintaining sound relationship with suppliers by building effective communication and providing them timely payment etc. Thereafter, retail buyers prepare financial budget which determines expenditure that must be incurred on purchasing maintaining the inventory and doing in store promotion. Other than this, retail buyers work in collaboration with other departments within the entity like, marketing, merchandising, quality control, store etc to assure projects are completed on time. Overall, it has been identified that retail buyer play a key role in planning, choosing and buying the appropriate quality and quantity of goods and merchandise that are offered within the retail outlet.

The implication of supplier relationship within the retail organization

The suppliers are the important part of retail organization as they provide goods and services which are further offered by retailers to final consumers. It is important for Tesco and other retail entities to maintain good relationship with the suppliers. This will help business in obtaining prime quality products at appropriate price. For this aspect, corporations can adopt supplier relationship management approach. It is practice of doing strategic planning, and the administrating all the conversation with the enterprise or individuals that provide product and services to retailers so as to enhance value of those interactions. The main concern of suppliers is to get proper information and clear all dues and payment on time. The suppliers in turn provide valuable market information that assures long term success and sustainability of business. It further minimizes the risk of failure of business. With the help of supplier relationship management, retail enterprises can develop mutually advantageous terms with strategic supply partners to provide improved level of innovation and competitive benefit. Furthermore, by maintaining proper supplier relationship, retail organization can use skills and competence of suppliers individual in attaining goals and objective of organization. The supplier further provides viable information about competitors, their strategy so that proper actions can be taken on appropriate time. Further, they suggest and advice retailers regarding product categorization that must be done within outlet to meet needs of customers in the best manner. Therefore, it is important for retail entities to maintain strong relationship with suppliers. For this aspect, proper technology and processes can be used which will further provide information about performance of supplier, important data across various locations or regions. Also, proper structure must be used to integrate supplier relationship management in the heart of business activities.

CONCLUSION

Summing up the entire essay, it can be stated that category management play an important role for the retail organizations. With the help of categorization, retailers can divide their bulk purchases into strategic business units. This concept play important role in providing value to its customers. There are eight important steps which can be followed by retail organizations to facilitate category management. It has been identified from the above study that retail buyer play important role within business. They further negotiate with suppliers, forecast the demand of products and help in promotion of business offerings.

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