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Category management: The best practices for 2022

Contemporary retail cannot exist without category management when the market is oversaturated with goods, suppliers, and companies. What exactly is it? You probably know the answer to this question, but we will still remind you. Category management stands for the organization of a range of products by dividing them into categories, unified by common characteristics or properties. As part of the category management process, you can increase sales by offering the customer a more convenient shopping experience and minimize your procurement costs.

Category management has several excellent practices to help you achieve maximum results for your business as a category manager or business owner.

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Practice №1. Arranging product categories and clustering

Creating and reorganizing the product classification system to further optimize costs is a crucial category management practice. This also includes combining existing categories according to overlapping features, reducing the number of categories in the business and expanding them. This simplifies category management for the manager. Visit here liangzhongmiye online best website.

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Clustering is regarded as a basic practice in category management. Still, it is only suitable for retail, particularly for an entire chain of stores that differ in size and location. Based on clusters, you can regulate the variety into the future, avoiding a surplus of goods that won’t be in demand. This, in turn, will help you reduce storage and buying costs.

The major advantage of clustering is the creation of unity and a certain cohesion in all stores. Furthermore, by visiting any chain’s outlets, the customer will already know what they can buy there and what to expect; therefore, they will become increasingly loyal to a familiar brand.

Practice №2. Using data analysis

Procurement managers have to attract interested partners and suppliers by building long-term relationships with them. They may use data from various sources to select partners and effectively communicate with them, including analytical studies, contract registers, debt databases, budgets, procurement cards, and ledgers.

Managers must regularly track performance standards, having already developed KPIs for each separate category. This includes the following data: the number of suppliers per category, the amount of costs, ROI per category (i.e., return on investment), average conditions for the category, and supplier quality rating.

Practice №3. Revising contracts with suppliers

First, you must review contracts in categories where you have recorded the highest costs. You should meet with suppliers who account for most of the budget to agree on more favorable terms. So, the task of the category manager when using this practice is to avoid costs wherever possible.

To renegotiate any contract successfully, you have to set up a trusting relationship with the supplier, focused on joint development cooperation and achieving long-term goals. As a powerful argument for reducing costs in communicating with suppliers, managers can refer, for example, to data on purchasing power in your market segment. You should also have quick access to the contract terms and carefully study its sub-clauses, starting with the contract terms (can they be changed or extended at once as a cost reduction bonus?).

Practice №4. Creating planograms

Planograms are a practice that you can resort to only after using the preceding ones. It will ensure that all your decisions concerning a specific category will increase its effectiveness after implementation. So, planograms are the visual display of your range and a plan of how this range should be sold. Therefore, the planogram practice improves your storage space use and makes the customer experience more convenient.

To create a planogram, you’ll need the merchandising principles approved by the management and data on the goods themselves, namely their technical characteristics and the store’s plan (location of counters, cash desks, etc.).

There are, of course, many other category management practices, with new ones appearing every day. You can adapt standard management practices to categories or try to come up with your own based on the collected analytics or offers from suppliers. In any case, category management is vital for the practical application of your budget and rational procurement for the business, so you should start implementing it as soon as possible.

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