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08/01/2004

VF on 'Three Cs' of Category Captainship

"Category captains" finally are making more of an appearance in apparel retailing.

Common in the grocery and consumer products industries, category captains are vendors that manage entire categories for retailers, including ordering, replenishment and even in-store shelf placement. Category captains often manage both their own brands and competitors' brands in the category.

Leading the charge in apparel has been Greensboro, NC-based VF Corp., which has achieved category captain status in the jeans category with a number of its retail partners.

Pat Garvey, VF's business process manager for retail floor space management, says the trend toward category management should be a boon for an apparel industry that juggles countless new styles each season. Category management methods have improved inventory management in the grocery/consumer products industries. "It's much more complex in apparel, due to the number of SKUs," says Garvey.

For retailers, the primary benefit of letting vendors take over category management is tapping into suppliers' extensive knowledge of their categories.

"No matter how expert [retailers] are in their area, they can't be an expert on every single brand a lot of the time," notes Garvey. "We're totally focused and dedicated to meeting the metrics they want and, frankly, we're doing some of the work that might otherwise fall on their side. We consider ourselves to be specialists in each of the areas that we manage."

The seamless nature of the category captain's relationship with the retailer is designed to drive higher sell-through and enable quicker reaction to overstock and understock situations, largely because the vendor is closely tracking store-level sell-through data and using it to plan production.

"It takes a lot of the mystery out of determining what orders are likely to be needed and what amount of product needs to be ready to go to each retailer," says Peter Charness, senior vice president of global marketing and chief product officer at JDA Software Group, which supplied VF with its Merchandise Planning by Arthur solution and with Planning by Intactix. "When you're talking in their language and trying to meet their objectives, it speaks volumes."

Collaboration, data sharing required

To successfully manage their brands for a category, vendors must collaborate closely with retailers, and utilize sophisticated technology to mine and analyze retailers' endless streams of POS and inventory data.

At VF, the category management process begins with sales planning, or determining the quantities of different styles to produce for a chain. After assembling an assortment by color and style for the chain, VF works with the retailer to tailor the mix down to the store cluster level. Using JDA's Arthur Planning tools, VF synthesizes local POS data with lifestyle, life stage and other demographic information to merchandise a cluster of stores that share similar characteristics, typically located in the same region. To plan what sizes to sell, VF sifts the data to the SKU level by region to help ensure sizes are accurately targeted to the region's consumers.

Next, VF creates and sends its retail customers store layout planograms to visually demonstrate how the merchandise mix should be displayed on the sales floor, down to the SKU level.

"They're effectively laying out the store," says Charness. "They're determining how big the department should be, where fixtures should go. GǪ This is all before you [the retailer] buy the product to make sure that the quantities that you're buying and the different colors and styles that you're buying are going to be merchandised together properly."

Finally, VF manages store inventory levels on a weekly basis. Replenishment analysts in the firm's jeanswear and intimates coalitions are charged with maximizing turns and ROI for retail accounts.

With this level of analysis of weekly trends, VF can adjust its production schedule based on insight into best- and worst-selling products. "It allows you to make more of the right product," says Garvey.

But Garvey says he believes a considerable side benefit of this intensive planning is forming closer bonds with retailers. "When we are talking shelf plans with the accounts, we are speaking in their language, on their calendar and using their metrics," he says. "There are not a whole lot of surprises."

Getting retail buy-in

While some retailers embrace category management, others need more convincing to hand over shelf planning to their suppliers.

"It's an evolving process," says Garvey. "People are not going to let you walk in the first time and just say, 'We're going to cluster your stores the way we want to.' They'll let you try some stores, and once you prove to be successful, they will embrace the process and allow you more latitude. You have to build your credibility."

Often, that credibility is built during seasonal planning meetings, when VF sales representatives and retail buyers review the past season's successes (and failures) and cross-reference VF's data with the retailer's data.

"When you're going into the second season or a year later, you're not working on two versions of the truth," says Garvey. "Everybody's looking at the same numbers, and there's some agreement, [i.e.]: 'Here's what we did and here's what we got for it. Here's what worked here, and here's what needs to be improved.'"

Indeed, Garvey says proven results from past merchandising seasons often are what convince retailers to let vendors handle shelf management of whole categories GÇö and to move beyond traditional merchandising methods, such as reliance on the buyer's instinct.

"Maybe merchandising the line is an art, but I think determining how you put the right product in the right place at the right time needs to be more scientific," adds Garvey. "The success of retail floor space management has demonstrated that for us. We're dealing with facts; we're not dealing with supposition."

Moving forward, Garvey says VF wants to take on category management responsibilities with other retail accounts served by its jeanswear and intimates coalitions, and to expand the business model to other business lines, such as sports licensing and outdoor performance apparel.

Garvey says he suspects other vendors will delve deeper into category management as ongoing consolidation drives closer partnerships between vendors and retailers. Some apparel vendors handle sales planning or shelf planning for retail customers, but not the whole process.

And it's the latter that promises the greatest payback.

"You can generate planograms, but if it doesn't relate back to the balance of what you're doing, what does it really mean?," says Garvey. "It's really integrating all the pieces of the process and building the interfaces to create a more seamless process. That's what gives you an advantage."