†Management Information Systems [MIS] Department, Indian Institute of Management-Calcutta (IIMC), Joka, Diamond Harbour Road, Kolkata, West Bengal State, India 700104. Email: firstname.lastname@example.org
†† Consultant, i2 technologies India Pvt Ltd, Andheri (East), Mumbai, State of Maharashtra, India 400 096 Email: email@example.com
Category management has been a potent tool for transformation of retail industry worldwide, especially the US. The USP of Category management is in the fact that instead of the emphasis on brands within a single category of products thereby enhancing competition within a category, it takes a holistic view of the category and attempts to maximize profits for the whole category. By doing so, it professes to optimize profits of the individual brands within the category also. In India, the modern retail industry is in a nascent stage but with a huge potential and a rapid growth projected in near future. There is much scope for venturing into category management, given its proven applicability in the West and its feasibility in transforming Indian retail industry. This paper proposes a strategic framework for implementation of Category Management in India as also the guidelines for doing the same. Keywords
Category, Category Management, Indian Retail Industry, Category Captain, Retailer-Supplier Relationship, Retailer-Consumer Relationship.
Category Management can be defined as a retailer-supplier process of managing categories (distinct manageable group of products) as Strategic Business Units (SBUs), producing enhanced results by focusing on delivering consumer value. Category management was developed as a strategy for retailers to successfully compete in each retail category for the shopper’s loyalty and money. Traditionally, retailers used to assign buyers to purchase brands of specific manufacturers instead of making all purchases within a particular product category. Category Management approach, on the other hand, has put forward a new method of doing business for the retail industry. It recognizes the interrelatedness of products in the category and focuses on improving performance of whole product category rather than the performance of individual brands. The traditional brand–oriented buyers are replaced with category managers who are responsible for integrating procurement, pricing and merchandising of all brands in a category and jointly developing and implementing category based plans with manufacturers to enhance the outcome of both parties (Pellet, 1994; Progressive Grocer, 1995 a and b; Supermarket news, 1997). A category is defined as a distinct manageable group of products that consumers perceive to be related and/or substitutable in meeting a consumer need (FMI, 1995) and the Category management insists that retailer’s categories, rather than the manufacturer’s brands, become the focus of management resources. The operating assumption of category management implies that performance in a category at the retail level will result in improvements in the suppliers’ performance whose brands are sold through the category. The category management theory posits that retailers can maximize their sales in the category through an optimal mix of brands, SKUs, and pricing that is determined from the consumer’s perspective and is based on historical sales data (Gruen, 1998). Once the retailer’s sales in maximized in the category, the equilibrium established within the category would be the best-case scenario for each individual brand.
2. CATEGORY MANAGEMENT vs. BRAND MANAGEMENT
The approach discussed above runs counter to the manufacturer’s brand management paradigm that views positive result mainly when the brand managers’ SKUs gain shares in the category. Brand management approach postulates that brands require a dedicated advocate to maximize their market...