Building Category Development Capabilities for the future
What do we want? Everything. When do we want it? Now!
Role-modelled by 20 and 30-something millennials (*ahem* and I can officially be included in that group…just – yes!), with mobile phones glued to their hands, short attention spans and need for instant gratification, we are increasingly becoming a society chanting “What do we want? Everything. When do we want it? Now!” Like it or not, this demanding consumer attitude has impacted the retail landscape as we know it, resulting in the decline of the traditional nine-to-five high street and giving rise to the on-demand economy, where the desire for something must be fulfilled as quickly as possible (be that a man on a bike, an Uber driver or a drone).
But what does this mean for retailers and CPG suppliers?
The old ways of understanding shopper decision trees and analysing past sales to determine what products to ship to stores and when, cannot meet the omnichannel demands of modern shoppers. Technology-enabled consumers have enormous expectations that impact every aspect of retail. This new reality has created the need for an “on-demand” Category Development approach that takes a future focused view.
Maximising the performance of physical store space and online assortment is critical. When correctly formulated it generates substantial incremental sales. Next-generation Category Development solutions will automate the production of localised assortments and layouts, based on the availability of more granular data and high-powered algorithms and analytics engines. Enabled by machine learning, category managers will easily produce store level planograms, and as a result discussions between retailers and suppliers can become much more strategic. The conversation will shift to focus more on category strategy and make the traditional method of an 8-step Category Development framework irrelevant. Of course, this needs significant changes in employee capabilities if companies are going to maximise the opportunities.
Which Category Development capabilities are most important for the future?
We believe the top Category Development capabilities that retailers and suppliers should begin adopting now, to remain relevant, competitive and successful in the next 3-5 years, are these:
- Identifying and unlocking future demand spaces: A critical focus to define the right offer based on a deep understanding of consumption occasions, purchaser missions and retail channel expectations. Some organisations need to be re-oriented from segmenting by consumer type to demand spaces with cross-functional teams focused on activating against these growing and white space opportunities. Category Development has often focused on the near-in, but there is much more scope now for bigger innovation.
- Mission development across categories: Paths to purchase will continue to be complex and non-linear leading to further contraction of the purchase to consumption cycle. Best-in-class retailers and suppliers have a strong understanding of shopper needs and missions and how they link to consumption/usage occasions, however, the step-change in the future will be building solutions that target specific missions to build more meaningful and personalised connections with shoppers at the moment where the purchase decision is actually made. This won’t necessarily be in store or sitting in front of a computer – and category developers will deepen their insight and activation to engage people at the right time and place.
- Rethinking space, assortment and layout approaches: Enhanced use of data analytics and automation tools will help retailers and suppliers to make predictive decisions around optimal space, assortment, layout and price elasticity. More of shoppers’ regular purchases will continue to be shifted online, so stores’ ranges will need to find a way to be relevant and flexible to encourage shoppers to have more reasons to visit a physical store i.e. seasonal, local or limited time products that bring something unique (and competitive) to the store or shopping experience.
- Reconfiguring routes to market: Routes to market will multiply and reconfigure, providing more options for retailers and suppliers to get their products and services into purchasers’ hands wherever and whenever they want them and this will require innovative thinking to make the most of these opportunities. Organisations will need a new strategy to broaden the ways they approach this and unlock growing demand space moments.
- Closer supply chain collaboration: As margins get squeezed, competitive pressures drive down prices and costs rise due to increasing complexity, supply chain efficiency will become even more critical. The role of supply chains has typically been viewed more on cost reduction rather than driving growth, which has been predominantly due to the reservation of commercial and marketing functions. But as shopper expectations increase, around availability and fresh solutions to meet their needs, supply chains will need to step up to play a bigger role in delivering growth.
At Brand Learning we’re being approached by clients who share our belief that enhancing Category Development capabilities is and will remain a strategic growth driver for the future success of any consumer goods organisation. If you’d like to hear more about how we can help build your team’s capabilities, please get in touch.