Making Category Management More Practical

Retail Category Management addresses a series of questions and demands decisions for category managers on critical issues such as product assortment and shelf-space planning. Product assortment planning involves listing decisions based on consumer behavior and substitution effects. Shelf space allocation involves facing and replenishment decisions based on space elasticity effects and constraints of limited shelf space and restocking capacity. The complexity of these questions has grown tremendously in recent years due to product proliferation and various consumer choice effects in the retail environment. It is an increasingly difficult task for category managers to find an effective assortment due to consumer preferences instability and the exponential number of possible assortments. This paper presents an updated review on scientific models that deal with assortment and shelf space planning. We show that shelf space allocation models do not clearly and comprehensively address assortment selection, neglect substitution effects between products and ignore the stochastic nature of demand. Assortment planning models on the other hand mostly ignore shelf space constraints and neglect space depend demand.

2000

Assessing a retailer's performance in a category is important to both manufacturers and retailers.

2016

With raising number of products offered by manufacturers, and same or smaller sales space retailers are in constant quest for optimal model of allocating limited shelf space to list of products in assortment that will insure highest possible profit of a certain category but also of the whole retailer’s product assortment. Category management’s space management is offering some old approaches and new models for additional optimization of shelf space management on category level. Study aspires to investigate state of shelf space management in retailing in Croatia and to clearly elaborate retailers’ category management and other principles in space management activity on category, segment and brand level. Paper aims to help food manufacturers, as well as small and family owned retailers in Croatia and in other developing countries to ease and facilitate navigation through the category management imposed by retailers. By using the method of observation and analysis of the share of shelf...

Marketing Letters, 2007

In this article, we endogenize product assortment decisions under a category management (CM) framework in a channel setup. We find that (1) product assortment is polarized more under CM than under a non-CM regime; (2) the price of a high-end (low-end) product in an assortment increases (decreases) under CM than under a non-CM regime; and (3) a high-quality manufacturer makes more profit than a low-quality manufacturer. In our model, the manufacturer's choice of quality and its polarization is driven by the existence and the decisions of the retailer (CM or non-CM). Finally, we have an interesting result on consumer welfare. We find that the total consumer welfare, as measured by consumer surplus, worsens under CM only when there is sufficient heterogeneity in consumers' tastes.

International Journal of Case Studies in Business, IT, and Education (IJCSBE), 2020

In brick-and-mortar retailing format, retailers need to ensure minimum level of inventory displayed at each store for each category irrespective of the revenue or profit generated by a particular category. It is observed that majority of bricks-and-mortar retailers in India assume; (a) existing category mix is ideal for their stores, (b) any modification in the existing category mix could possibly lead to loss of sale of an existing category, (c) it is preferred to have categories generating higher average transaction values and most importantly,(d) categories with lower average selling price products and generating lower average transaction values negatively impact store’s revenue. Such assumptions and widely followed practice have created a predisposition and mindset in store managers and they believe that, their store delivers revenue and profit to the best of its potential with the existing category mix. In this research, we have analysed the existing category mix of a select retailer, attempted to alter the existing category mix through an experiment and evaluated change in (a) category level profitability, and (b) overall store profitability.

2001

The authors develop a conceptual framework concerning the implications of assortment changes on category sales. They argue that the category sales effect of assortment reductions and extensions is moderated by (1) characteristics of the specific items removed or added, and (2) characteristics of the category in which the changes take place. The authors then estimate the category sales impact of additions and deletions, and test the hypothesized moderator effects in the Netherlands, using IRI / Europanel data from 1997-1998. This data set is unique in that it covers no less than 63 categories and 358 Dutch supermarkets, the richness of the database providing a broad empirical basis to test the framework and yield generalizable findings. Key variables moderating the effectiveness of assortment changes are found to be the items' uniqueness, privatelabel nature and display support, as well as the category's total number of SKUs, concentration, propensity to stockpile and degree of addition activity.

Applied Stochastic Models in Business and Industry, 2005

Starting from a brief literature review, this paper identifies key issues for future research in three related category management (CM) decision areas: assortment, shelf and stockout management. It elaborates on the interdependencies between the three CM issues, underscoring the need for a more integrated research approach. A common framework is presented of factors mediating and moderating consumer reactions to CM changes, which may provide guidelines for future research on reaction heterogeneity. The paper concludes with a discussion of the methodological challenges to be faced, ranging from advanced data collection procedures, over the development of more ingenious model structures, to the design of more powerful estimation and optimization routines. ; 21:383-392 K. CAMPO AND E. GIJSBRECHTS 390 4. CONCLUSION This paper briefly summarized the available literature in three key areas of category management (assortment, shelf and stockout management), elaborated on the interdependencies between the three CM issues and presented a 'common framework' of factors mediating and moderating consumer reactions to CM changes. In the course of the discussion, we identified areas where more insights were needed, and discussed the methodological challenges to be faced, ranging from advanced data collection procedures, over the development of more 'ingenious' model structures, to the design of more powerful estimation and optimization routines. These challenges are bound to trigger numerous future studies, by academics and analysts from practice, alike.

Wiley Encyclopedia of Operations Research and Management Science, 2011

Retail stores have a limited amount of space and many products to display. The amount of shelf space allocated to an item affects its frequency of replenishment, incidence of stockouts, and demand rate. Therefore, finding the optimal amount of shelf space to allocate to each item becomes a key factor for success. Effective shelf space allocation leads to higher profits by increasing sales and customer satisfaction, creating better product visibility and brand exposure, and reducing inventory-related costs and stockouts [1-3]. Indeed, effective shelf space allocation has become harder and more critical in recent years because of increases in product variety and competition. For instance, on average, the number of consumer-packaged stock keeping units (SKUs) in the marketplace increased by 16% per year between 1985 and 1992, whereas shelf space expanded by only 1.5% per year during the same period [4]. A modern conventional supermarket offering major food departments, nonfood grocery, and limited general merchandize products has 20,000 to 30,000 sq. ft of floor space and it carries 20,000 to 40,000 SKUs [[1], p. 40]. Shelf space allocation is the process of apportioning the amount of space to each product in order to maximize the total store profit or another well-defined objective function subject to limited store space and other financial and operational constraints. Shelf space is usually measured in linear terms

Journal of Marketing Research, 2020

Using one field and two online lab experiments, this article shows that congruency between shelf layout and a consumer’s internal product categorization increases the perceived variety of the assortment and reduces the perceived complexity of the shelf layout. These assortment perceptions, in turn, heighten purchase intention and satisfaction toward the chosen item. Results are robust across internal categorization measurements (planogram design vs. sorting tasks), congruency measures (distance- vs. matching-based), and products (biscuits vs. yogurt snacks). In the field study, familiarity—operationalized as either consumption frequency or subjective product knowledge—increased the overall effect of categorization congruency and strengthened its pathway through perceived variety (vs. the one through complexity). The authors show how their research can be exploited to improve shelf layouts by optimizing the external categorization. They demonstrate the value of a unifying Bayesian fr...

Journal of Retailing and …, 2009

Manufacturers and retailers have divergent profit objectives. A manufacturer wants to maximize the profits of its own brands. The retailer, on the other hand, wants to maximize the profit of the entire product category. In spite of these apparently diverging profit objectives, both manufacturers and retailers are increasingly realizing that profit margins of both can be increased through cooperation rather than confrontation. Category management is one such cooperative strategy that often involves the appointment of a leading manufacturer as the ''category captain''. A category captain advises the retailer on the best way to price, display, and promote products in a category, including those of the competitors. This arrangement, therefore, ensures retail efficiency but raises doubt about possible misuse of power by the category captain to circumvent fair competition. In this paper, we outline the antitrust concerns about this arrangement, and provide a framework that effectively addresses these concerns.