Category management in retail: why do you need it, and how can you apply it?

A category manager is someone responsible for shaping a product range for a retail outlet or a chain of stores. Category management works with a selection of goods, places them in different categories, and then offers them to their customers based on their psychological characteristics and buying power.

A brief history of category management in retail

More than 30 years have passed since the introduction of this business area in retail. During this time, category management has proved its worth: it has helped shops expand their range and improve their results while also helping consumers to receive the products they want at the right price. However, not every company uses this type of assortment selection. After all, it requires restructuring the existing work model, which is expensive.

Initially, category management mainly focused on selecting products to be featured on the store's shelves. To improve the quality of this selling proposition, consumer research finally became a focal point for managers at the beginning of the 21st century. Before the 2008 financial crisis, category managers started to think of a group of products as a separate business unit, not as a bunch of products that do not correlate with each other. After the crisis, this direction initially developed in bigger companies that managed to survive the market decline. From 2010 to 2012, through the development of online businesses, category management received a new lease of life. And we get why: it was a boom time for this new form of project management within retail.

Why does retail need category management?

  • To increase profits. It makes sense: the better the range of products, the more often consumers will buy goods from it. Category management enables you to generate the perfect set of goods for different shoppers, which will be actively purchased.
  • To test hypotheses about consumers. This, in turn, will also help increase profits. You will find out which consumer segments are predominant amongst your customers, and you will be able to tailor your range to their expectations. Additionally, you can find a way to attract new shoppers by introducing new product categories in your store.
  • To make the company work more efficiently. This makes the organisation’s life easier: no unwanted goods are collecting dust in the warehouses, people are buying products quickly, and life is blooming and in full swing.
  • To simplify relationships with suppliers. The category manager communicates with representatives of the suppliers, negotiates with them, selects the most suitable contractors, and resolves any issues concerning the procurement of goods. They free up their manager's time, and sometimes they even replace an entire department of specialists.

How is category management applied in retail?

It enables you to make up an assortment in stores selling everyday goods. For example, the category of goods found in outlets of the Inditex brands, which includes Zara, Bershka and other stores, can be limited to "top garments". For example, you could find a plain cotton crop top, a warm baggy jumper with bright letters on it, a silk blouse with a bow around the neck, and a variety of jackets. All these items are created from different materials; they have dissimilar names and distinct characteristics. However, for convenience, they are placed into one category. In online retail (for example, on Amazon), similar products from related areas can become a category: a mirror and a small shelf, a bedspread and decorative pillows, dietary supplements and convenient boxes for storing daily vitamins.

All products within a category meet certain customer tastes, interests, behaviour, and buying power. That is why categories often become a testing ground: they are made up of goods already purchased by the company, and then the management offers them to a limited circle of potential buyers. This is how retail evaluates the possibility of attracting different segments of consumers. In the current environment, product lines that pass the test can be labelled as online-only goods. Meaning that you can only buy them on the store’s website and then pick up at a store location.

Thanks to category management, the store stands out from the competition. Which retailer do you think of when you need to buy expensive shoes: an independent boutique that sells a limited line of products or a larger store that carries everything and lots more from the category you want? Most likely, you will choose a store that offers a wide range of products. Nevertheless, this might not be the main advantage of a business that actively uses category management. This kind of management deserves credit for the confidence of the consumer that it is here that they can get the best product from a certain category at the best price.

Category managers are in demand in retail. They receive high salaries and cooperate with international companies without even leaving India. So, take a closer look at this field. Who knows, you might become the next category management star.