ORLANDO, Fla. -- Efficient Consumer Response without category management has a "supply side" focus. But with category management, ECR marries the demand and supply sides.
The latter strategy is the key to success for supplying and distributing products through the supermarket trade, according to Brian Harris, chairman of Retail Directions, a consulting firm based in Playa Del Rey, Calif.
"Category management is the key enabler of ECR," he said, speaking at Information Resources Inc.'s Apollo Users Group International conference here. "ECR without category management will go nowhere. Gains will be made, but the true potential will be dramatically understated." Harris is an internationally recognized authority in retailing management and category management. The latter is a distributor/supplier process of managing categories as strategic business units and producing enhanced business results by focusing on delivering consumer value.
Harris explained that category management is needed today in the supermarket trade because of consumer trends, competitive pressures, financial/asset management realities, changing retailer/ supplier relationships and total system focus, or ECR.
He predicted by the end of the year about 40% of supermarket retailers will be doing some sort of category management.
"I don't find Kmart and Wal-Mart to be heavily into category management, even though you would think they would be because their history is more compatible with that type of thinking. In my opinion, mass merchandisers haven't yet upgraded to category management, but watch out.
"On the supplier side I believe there are 10 or less suppliers able to do this right now. Wholesalers have basically stood on the sidelines and watched. In the last couple of months, we have seen a significant increase in the number of wholesalers saying this is the way they must evolve.
"I have been personally disappointed in the broker community, and their associations, in that they haven't been more aggressive in recognizing that category management truly is a key element in the way of doing business," he said.
He said most supermarkets begin their category management in the grocery aisles and then spread to drug and general merchandise categories.
"The big frontier is perishables. It is very exciting. We as a company have begun to develop plans for lettuce, potatoes, beef, fish and fresh pasta. The data is a little different, but the conceptual thinking about strategy and building a strategic plan doesn't matter if it comes in a package or a side of beef in a case. I think you're going to hear a lot more about perishables category management in the next 12 to 18 months," he said.
He said much of the trouble in terms of lost sales retailers have been experiencing from category killers is because retailers do not know their customers' wants and needs.
"When we ask, 'What does the customer want from this category?' I really don't believe the information we have brought to the table can answer that question.
"That is one of the reasons some of our main competitors
have been able to make inroads," he said, again citing the pet food category.
"People tell me that 23% to 25% of the pet food business comes out of pet stores. Don't take that lightly. I personally take that as an insult, because, frankly, that never should have happened.
"We could have evolved into that similar concept and carried more of the products that the consumer needs. "We should have been first and not have to fight to protect what we have. That is one category and who knows what the next one will be," he said.
Ten years from now, he predicted, the emergence of the category killer will be one of the most significant turning points in the history of the grocery industry. "It is really forcing us to redefine the level at which we need to position ourselves and that is what category management is designed to help us do," he said.