There’s a lot of hype about eCommerce and its rapid growth but the truth is, brick-and-mortar retailers still account for about 90% of consumer purchases.
People doing the majority of their shopping in person doesn’t guarantee that opening a brick-and-mortar store will be a success. As a matter of fact, it’s far from it.
Consumers today have so many options and consequently, so little patience. Because of that, it’s imperative that retailers adopt systems that help them to more effectively source products and better serve clients.
That “process” for many is category management.
Category management describes the mindset of grouping or “bucketing” products in a way that allows retailers to create “rules of thumb” that can boost operational efficiency.
Below, we go over some of the advantages of category management so you can see how it can help you make and save more money!
1. Focus on Winners
One of the biggest category management mantras is the 80/20 rule. This rule says that you need to put your focus on the 5 products that make up 80% of your business.
There are a few factors that might make a product valuable to you. For example, some products might have the highest margins while other products might drive the most foot traffic.
No matter which factors you prioritize, find the five products that you can’t live without. Make sure that you’re sourcing them at the best rates and are giving them shelf priority.
This increased attention on your “winners” will allow you to score easy savings and income wins with nominal effort.
2. Success by Osmosis
Another category management strategy comes in the way of identifying your most “buzzworthy” items. You need to identify your most profitable and popular products.
In retail, it used to be that sellers would hide their popular items in the back of the store so consumers would have to look around and make impulse buys in the process. Given how little patience consumers have today, this strategy is quickly shifting.
Now, stores are putting popular items where consumers can get to them easily but are putting their highest margin items right next to them. This allows retailers to drive valuable impulse buys without inconveniencing costumers.
3. A Playbook for Employees
Employee productivity can benefit big-time when your operation categorizes merchandise. Bucketing merchandise lets employees identify which products to nudge customers towards based on your store’s priority.
Most stores will exercise that strategy around their “high-margin products” bucket.
Imagine if every time somebody had a question about party supplies, your employees knew which brands put the most money in your pocket. What if they pushed high-income generators to your customers at every opportunity? What would that mean for your store’s bottom line over the course of a year?
4. Identify New Opportunities With Ease
Your suppliers understand category management very well. As a matter of fact, we recommend tapping into your supplier’s information pool. This will help you understand where you’re missing out on category opportunities.
It may be that suppliers have a hot selling category that has 10 items in it and you’re only sourcing 6 out of 10 of them. In that example, if you have a good relationship with your supplier, you could have them reach out to you and let you know that you could boost your profits by digging deeper into the category’s pool.
Remember, suppliers are sourcing sales data from a number of stores that they work with. That means that their insight into what’s hot is a lot more complete than what you can deduce with only your numbers.
5. Fad Avoidance
When you have a good eye for categories, you’ll be less prone to investing in fads.
Fads like “fidget spinners” may seem like winners but when demand evaporates, you end up not being able to move that last shipment you ordered. Your profits from prior success with the product will evaporate.
6. Better Inventory Analysis
The better you understand what you’re selling, the more money you’re going to make and save. That’s one of the main reasons why we love category management.
Category management forces you to analyze your inventory in-depth so you can accurately group things. This analysis process can give you insight that will allow you to make a number of educated decisions in all aspects of your store’s operation.
7. Buying in Category Bunches Leads to Savings
With categories identified, you can let your suppliers know about them and ask to buy category items in bulk at a discount. While some suppliers may not be open to you creating your own grab-bag of discounted products, if you have a long-standing and lucrative relationship with them they might cut you a break.
If suppliers won’t budge on the category discounts you’re requesting, shop around for other suppliers.
It will surprise you how many people will cut you a deal in exchange for your business.
Do You Need More Category Management Tips to Help Your Bottom Line?
Category management gives you deep insight that allows you to understand your products at a glance. Armed with this approach to inventory management, you’ll be able to better prioritize your operations, better serve customers and best of all, make and save more money!
For more information on how to get the most out of your retail store, check out additional business content on our site, “Young Leaders” today!