The assistance category captains can provide retailers is sorely needed -- yet resistance to the practice lingers. For one thing, category captains’ influence raises concerns about the potential shift in bargaining power to the manufacturer. For another, many merchants still nurture the belief that merchandising remains an art, not a science of SKUs and brands that can be enhanced through data analytics.
But with manufacturers’ data-driven capabilities in demand forecast and replenishment decisions, the use of category captains merits a new look.
In an era where category expertise matters more than ever, manufacturers can go in for the deep analysis dive in ways retailers can’t. Manufacturers know how a category is selling across multiple retailers, and they have access to a wide range of information such as competitors’ downstream POS data and inventory levels.
This type of expertise can prove wildly successful. Take for example, Anheuser-Bush, which, as part of its balanced portfolio approach, used analytics to help convenience stores’ better leverage their beer categories. After finding that convenience store beer sales spike in the evening, the company recommended that operators add beer to their feature bins after 4 p.m. to accommodate evening shoppers.
Similarly, the Hershey Co. also yielded positive results for convenience stores, reviving sales in the gum segment with its recommendations to rationalize and reduce assortments.
Evaluating the Options that Work Best for Your Organization
Not every vendor has the capability to benefit your organization. But the potential improvements make the partnerships worth exploring with key vendors.
So, where should you begin? The following steps can help your retail organization carefully evaluate whether category captains can beef up its merchandising strategies.
1. Determine the right category. Retailers should continue to manage the strategic categories that are core to their organization. The best categories to consider outsourcing to a category captain are those that are not key differentiators. In addition, ensure hedonic level is low, and variety is not a major determinant of customer satisfaction. Cross-category opportunities should also be low, and the categories’ rate of new-product introductions high.
2. Select the right team. Proven management skills are a must for team members, both within your organization and the vendors’. Be sure to involve non-captain suppliers in category-management decisions to avoid competitive exclusion.
3. Put controls in place. Adopt guidelines to govern your partnership with a category captain. Remember that although the captain may take the lead on certain decisions, the aisles belong to your organization: Be sure to include language that specifies your organization is free to follow -- or not to follow -- the manufacturer’s recommendation.
4. Take it slowly. Relationships take time to build. Begin working with a category captain on a limited set of basic category-management decisions such as pricing, assortment, and shelf-space management. Once you have developed confidence in the partnership, you can begin to tackle more complex issues relating to logistics and your supply chain.
Technology has expanded the role of category captains far beyond its original task of assortment and space management. It’s time to revisit whether category captains can help your organization deliver the competitive edge it needs.