Selling first began as soon as the first human beings appeared. From time immemorial, unique locations were created for this purpose, including markets, bazaars, and shopping areas, where you could buy both vegetables and luxury goods from merchants. In those days, no one really thought about making the right arrangements for the merchants and their goods, making it more convenient for the customer to choose and spend more money than they originally planned. However, over time, when a wide variety of goods appeared, merchants had to start to think about how to conveniently and effectively arrange their goods to beat the competition. That’s when category management came into existence.
Category management is the process of assortment management, whereby categories of goods are created and connected based on certain characteristics. For example, various dairy products will include yoghurts, milk, cheese, cottage cheese, etc. The customer can then quickly find the right products. A business can then figure out exactly where and why it has to offer its goods to the consumer. In this regard, the introduction of category management supplies many advantages and obvious convenience for the consumer. What advantages are we talking about, you wonder? Well, let us tell you!
Optimising work with suppliers and improving relationships
Category management is about more than just organising products and data. It is a clear plan for buying goods, which will, in turn, simplify the work of the business and suppliers because it allows you to:
- Better understand the criteria that a supplier must meet, making it much easier to select, evaluate and attract suppliers.
- Personalise your approach to suppliers, ensuring a more long-term and trusting relationship with each other and collaborative development.
- Minimise disruptions and conflicts. The presence of category management supports the sustainability of the business through a clear supply chain and a transparent division of the areas of responsibility.
More valuable information and, as a result, better decisions
Category management implies data analysis, a powerful tool for developing any business. Based on data collected by working with category management, a company can optimise its structure, gain a comprehensive view of costs and supply chains, and predict market conditions. Data analysis also makes it possible:
- To easier manage the suppliers themselves, negotiating with them for the best terms and prices (the information collected during the analysis can be used as a reason during business negotiations).
- To shape and customise categories according to customer needs and the organisation’s goals for profit, production, and risk mitigation.
- To predict added risks and challenges and find ways to avoid them. For example, based on category management data, you can see potential disruptions to the supply chains and predict the impact of any external events (pandemic, natural disasters, international political conflicts, etc.).
- To use human resources more efficiently. Effective category management needs skilled and well-trained professionals, such as category managers. Anyone from your team members who has the proper skills or is ready to undergo more training can become one.
By analysing category management data, you will also be able to allocate business resources to those strategies, products, market trends and promotion channels that are most likely to lead your business to success.
A better understanding of costs
Companies not using categorical management often lack complete and exact information about costs. They do not track and analyse contracts and supplier relationships, focusing solely on sales. However, if the full list of suppliers and their terms are known, so are the costs, which can be reduced or eliminated altogether, like a leak in a hose.
Understanding the customer journey and offering a better service
Category management includes using specific tools such as Category Tree to view the customer’s path through an offline or online store. Then, by understanding their path, you can make it more convenient and, as a result, more profitable for your business. After all, any customer is primarily driven by consumer logic and personal needs. So, by understanding and using the laws of human psychology, you can significantly increase the number of sales. For example, the American company Schnucks did it in 1985 when it expanded the counter for high-end baby food. Thanks to the area organisation and considering the needs of their shoppers, their sales increased by 20%!
Category management has plenty of advantages; the most important one is that it ensures the viability of the business for many years to come. After all, using it, a company receives up-to-date and useful information about all internal processes from working with suppliers to organising goods inside the store. As a result, nothing will take it by surprise or expose it to further risks.