It’s easy to paraphrase Animal Farm, but if you’re a supplier struggling to get the cut-through you want in-store, you might be wondering why your products aren’t getting the secondary displays, or any secondary displays.
Retailers have to make choices about which categories are more important, and which are less important. In simplistic terms, this is the essence of Category Role. It’s about making choices and prioritizing some categories over others.
It informs everything, from the Category strategies suppliers and retailer pursue, and the tactics they choose to deliver those strategies.
If you walk into a store, it can often be obvious which those prioritized categories are. They tend to have more space, more prominence, more off-shelf displays, sometimes deeper and more frequent promotions, keener prices.
In an on-line environment, the principles are broadly the same. Spot the Categories which are in the prime positions on the Landing Page. Which are the categories that have pop-ups and secondary space whilst you’re doing your online shop?
For some Big Box retailers it could be Health & Beauty, for others it could be Bakery, or Fresh Fruit & Veg, or Beer, Wines and Spirits.
For some Convenience stores it might be News & Magazines, or Chilled Drinks, or Coffee & Food to Go, or Lottery.
It’s all about the Shopper
Turn it around and think about it as a Shopper. You decide to shop in certain stores (real or on-line) because of many different criteria, over and above Price.
We hear shoppers picking out both Categories and Products as the reason they choose one store over another, or actively rejecting a store, because they have a poor offering of Category X or Y.
How many times have you heard a focus group respondent with scathing comments about how awful it is to shop for your category in one store, and that’s why they now make a special trip to shop for it elsewhere, because the range is better, or the prices are better, or they’ve always got a great promotion on… the list goes on.
What Category Roles are there?
So what exactly do we mean by Category Role and how do I know which role my category is playing?
Whilst retailers may choose different names, or not even assign formal titles, you can be sure that all retailers will be making some form of strategic prioritization across the categories in-store based on the role they want each category to play. At TPG we define 4 Different Category Roles that retailers will use.
So far we’ve been describing the characteristics of Destination Categories.
These categories are chosen to drive footfall into stores. The retailer aims to be the primary provider of these products, and should help define the image of the retailer. The retailer wants to win in these categories with above fair share of sales and growth ahead of the market. They will invest resources in these categories. So it will have a market leading range, more space, better space, perhaps bespoke fixturization, better availability, perhaps store staff who are there to offer help and suggestions.
Retailers may also look for supplier investment to help create the ‘destination’ look and feel’
If it is a destination, as retailers will want their target shoppers to drive past other stores to come and shop for this category in their store.
These types of Categories tend to make up between 5-10% of the categories in a typical supermarket.
The bulk of the typical store (around 50-70% of categories) is made up of Core Categories.
These are about being competitive with the other retailers. A retailer will want it’s fair share of sales and growth in these categories.
The tactics in-store and on-line will reflect this. The range will be competitive, as will the space, the prices and the promotions. Core Categories are vital for any retailer as the ‘engine room’ of the store. They deliver the sales and sometimes profit, which can help fuel the investment into the Destination Categories. They help provide the rest of the trolley shop, once the destination category purchases have been made. “I may as well do the rest of my shop, whilst I’m here”.
The third type of category is Convenience Categories.
These complete the offering for the retailer, for everyday categories. These categories make up around 10-20% of the stores categories. These help re-enforce the image of the retailer as somewhere the shopper can do a full and complete shop. Whilst these categories tend to have less space, typically smaller and simpler ranges, these categories play an important role in the area of profit generation and margin enhancement as prices tend to be less competitive and promoted less frequently, if at all. They should deliver higher than fair share in terms of profit.
These categories are often hidden away in obscure corners of the store, or need to be searched for on-line. These are typically the categories that store staff will be asked ‘do you stock X or Y’, or ‘where can I find X or Y’. The example TPG uses when we train on Category Roles is Shoe Polish.
It would be unusual to find more than maybe 3 or 4 types of shoe polish. They take up maybe a shelf of space, on a mixed end with other equally obscure products. They will never be promoted and they will be priced at a premium with a higher than average margin. They are there to complete the offer.
The final type of category is Seasonal Categories that make up the remaining 5-15% of categories.
These are categories that have a seasonal bias. There is less demand for Snow Shovels this time of year than there is in winter.
This can also happen within categories as well as between categories. For example, there is less demand for Oatmeal in summer and more in winter. So within the Cereals category many retailers will flex space (and range, price and promotions) seasonally between Oatmeal and other cereal to account for the seasonal nature of the sub-category.
The best example of a Seasonal Category would be flowers for Valentine’s Day. This is an example of a Seasonal Destination. Every Retailer wants to use Valentine’s Day as a reason to shop in their store. That is why Red Roses defy most of the usual economic rules of demand and supply. Red Roses are promoted to drive footfall into store where love-struck shoppers will spend more money on the rest of their shop. Retailers are playing a bigger game, and placing their bets (or in more practical terms their resources) on the fact that getting the Valentine’s Day offering right will bring greater overall spend into store. They are choosing to accept lower profits on Red Roses as they chase the bigger prize of the overall trolley spend.
The importance of Choice & Relativity
Category Role is all about the CHOICES the retailer makes. If the retailer wants to be famous for Category X, then they must choose to invest fewer resources in Category Y. An easy way to see this is to think about the space available in-store. If the retailer has given more space to ‘World Foods’ as they target the local community, that space has to come from somewhere else in-store.
When we validate one category’s Role, we have to compare the RELATIVE merits of our category compared to others in the store. For example;
• Is our category bought by a large proportion of shoppers relative to other categories?
• Is it bought relatively more frequently compared to other categories?
• Is it large or small in terms of sales, growth and profit relative to other categories?
• Does our category provide the potential for the retailer to differentiate the offering relative to other categories?
The categories RELATIVE attractiveness compared to other categories will help validate whether the retailer has determined the right ROLE.
So the impact of Category Role is felt right across the store in terms of the Range, Macro & Micro Space, the Price and Promotions. Category Roles determines which categories will be ‘heroed’ and which will be marginalized.
So not all Categories are the same. Some are indeed more equal than others!
In an fiercely competitive shopping world where loyalty is largely a thing of the past, and shoppers are increasing the number of missions, Category Role will become even more important as shoppers pick one store for Dry Groceries, another for Fresh Fruit & Veg, another for Drinks, another for Children’s Clothes.
The choices retailers make about the Categories they use to help build their image will determine their success in the market. With growth in FMCG hard to find for both Retailers and Suppliers getting this right becomes more and more important.
In an Omni-channel world where data is being used more intelligently to target shoppers, expect far more tailoring of Category Role to the individual. Shoppers will vote with their ‘likes’ and who they ‘follow’ to help curate and manage the stores they use to buy the categories they need. The shopper will play a much more active role in determining Category Role in the future. Get it wrong on-line and it could well impact the potential for the shopper to wander into store as well. Get it right and the shopper will find themselves satisfying more and more of their needs with that retailer, perhaps even Shoe Polish!
If you’d like to learn more about how The Partnering Group can help you understand the Role your Category plays, please contact us.