From category management to shopper-centric retailing
It can be done–here’s how
The 2015 Food Marketing Institute (FMI), Winston Weber Associates (WWA), and Deloitte Consulting LLP Shopper-Centric Retailing study focuses on the gaps between merchandising practices common in today’s Consumer Package Goods (CPG) manufacturer-retail environment and the practices that can be applied for the industry to become more effectively shopper-focused.
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About the 2015 Shopper-Centric Retailing study
This study draws on the perspectives of a proprietary Shopper-Centric Retailing survey, submitted to the CPG manufacturer and retail trade, which resulted in 68 responses (34 retail and 34 CPG manufacturers). It also draws on the collective client engagement experience among FMI, WWA, and Deloitte Consulting in addressing merchandising challenges in the food, drug, and mass-merchandising sectors.
The survey questions, shown in the Appendix, cover the respective company’s experience in merchandising practices, as well as their perspectives on overall industry experience. Topics include company backgrounds and their experience with category management, supplier collaboration, merchandising toolsets, shopper-insight sources and quality, merchant organizational structures, and results measurement. The respondents range in size, geography, and (for CPG manufacturers) channels served.
The case for change and the promise of shopper-centric retailing
The term “category management” has been common currency and business practice in the retail industry for more than two decades. It was originally developed in the 1990s, in a time when retailers purchased products by supplier, instead of by category, and when early product variations and introductions started proliferating beyond the capacity of existing shelf space. With category management, technology, and analytics could be applied to these challenges, prescribing formulas that would optimize several objectives—sales, margin, inventory, cost, speed-to-shelf, and shelf-space productivity—at the category level, versus maximizing objectives and SKUs in isolation of each other.
In addition, the approach provided an opportunity to integrate tactical merchandising decisions—assortment, pricing, promotion, and presentation—around cohesive strategies. The approach was built around a portfolio framework, requiring prioritization and balanced role definitions that could act as a material extension of how the retailer wanted to brand the store and image. While category management in practice had process variations across industry practitioners, most variations shared these common objectives.
Category management made demonstrable improvements across the industry after its initial introduction in the decade. The case for change is compelling, and reinforced by survey responses, as well as our own experience working with both manufacturers and retailers following its standardization in the 1995 Efficient Consumer Response (ECR) industry-wide initiative.
However, in today’s rapidly changing business environment, the term typically carries the impression of “yesterday’s news.” In the Shopper Centric Retailing Survey behind this report, 100 percent of both retail and manufacturing respondents reported that they believe some degree of change is required, and 25 percent indicated that an entire redefinition and transformation is necessary. The case for change is compelling, and reinforced by survey responses, as well as our own experience working with both manufacturing and retail companies.
This report explores the three key pillars in today’s marketplace that support this change and what shopper-centric retailing looks like.