Jerry Singh and Category Management

1) How long are you working on category management and on education in this field?
Since the late 1980’s….twenty years to be exact, since the very first Customer teams were formed by Procter & Gamble to work with Wal-Mart’s merchandisers—leading to the evolution of Category Management which was formalized with the US ECR (Efficient Consumer Response) report in 1993, and the Europe ECR report in 1997.

2) How would you define category management?
In simple terms…a collaborative process jointly undertaken by the retailer and its suppliers to make the best offer to the shopper. More formally, the ECR committees have defined it as “A distributor/supplier process of managing categories as strategic business units, producing enhanced business results by focusing on delivering consumer value”. The food Marketing Institute defines it as “Determining pricing, merchandising, promotions, and product mix based on category goals, the competitive environment, and consumer behavior”. All these definitions are saying the same thing in different words…key is to note that we are thinking categories and not brands, both retailers and suppliers are working as partners, and decisions are based on what is best for the consumer.

3) How much was category management developed in the world in the past 10 years?
Since the beginning of the ECR movement in the US in 1993, Category management has been widely adopted around the world. The Europe Category Management report was published in 1997 after which all leading retailers & suppliers in the consumer products industry have implemented it …with varying degrees of success.

4) What is the importance of category management in the modern retail?
It is a competitive imperative…I do not know of any major players who are not practicing it! Of course execution varies all over the map---as is to be expected for any business process.

5) What kind of difference in category management practices you noticed on the different markets?
Sharing information, availability of data, quality of information & decision systems, and the nature of collaboration between retailer-supplier partners. Sometimes the legal environment or cultural factors can also influence the process.

6) Should initiative for category management come from retailer or supplier?
It can come from either, but essentially it is a Retailer driven process. ?

7) Does category management bring more benefits to retailer or supplier??
To both…otherwise it will not work long term. No partnership can survive if only one p?arty gains all the benefits.

8) Why do you claim in your ECR reports and the book “Next Generation Category Management”, that the basis of category management is collaboration?
The supply chain from production to the consumer involves both the retailer and the supplier. It can be optimized only if both parties work together to serve the consumer—to provide the best products at the lowest prices.

9) What level of collaboration is realistic to expect from retailers and suppliers, having in mind that their interests are not matching completely?
Their interests may never match completely, but both are in business to meet consumer needs! Once this is recognized, and both parties continue to get tangible benefits from the partnership, the collaboration continues to increase on an ongoing basis. Many industry leaders, such as P&G and Wal-Mart, have been practicing Category Management for nearly two decades now with increasing collaboration…many of the details have changed or been fine-tuned but the basics have not. There are many such examples in Europe also.

10) On which way does collaboration in USA functions, between for example Wall-Mart and it’s suppliers?
Setting targets for category sales, profits, productivity jointly….sharing information & linking systems that enable the achievement of these goals….working together on an on-going basis to execute the category plans.

11) How important is the trust for cooperation between suppliers and retailers for success in category management?
Very important…and it is generally built slowly over time…and once shattered, almost impossible to regain. But that is true of any partnership!

12) How fierce are negotiations between retailers and suppliers in USA and how much there are focus from both sides in finding win-win solutions?
The “fierceness” depends on the maturity of the relationship between the partners. I encourage open exchange of ideas without personalizing the issues. The focus should always be on finding win-win solutions but being only human sometimes people forget!

13) In which direction does world retail develops?
More globalization, consolidation, collaboration, and new ways of winning and retaining loyal customers.

14) What happens with retailers in USA that didn’t have consistent retail strategy?
They go under over time…you need both the right strategy and consistent execution to be successful long term.

15) Who eventually wins in retail?
Those that keep their customers, and keep on adding to their base. Category Management is one of the tools to do this by consistently giving the best offer to the consumer.

16) Why is Wal-Mart so successful?
They have the best consumer offer most of the time, are quick to spot trends, have built the best infrastructure, and scale. Note that scale is built overtime and is the result and not the cause…but once you have it, it gives great competitive advantage.

17) What is the effect of the current Global recession on Category Management? Do you expect retail giants (Wal-Mart, Tesco, Carrefour) to continue their emphasis on private label in today’s economic environment, and how does it affect Category Management?
While it is true that in the current Global recession consumers have become much more price conscious, and retailers have increased their focus on private label—it has only made Category management more important! This is because it is now even more important to understand the Category and the interplay of Private Label and Branded goods. The manufacturers have also responded by introducing cheaper or more ”basic” items. Increased collaboration in the value chain also helps reduce inventory and cash management.

18) How would you compare the level of category management know-how and implementation in Eastern Europe vs. developed markets such is USA?
My experience in Eastern Europe is limited to Croatia and Serbia during the past four years. The enthusiasm and the knowledge of the basics is very much there and several projects have been implemented. My impression is that Category Management is much more advanced in the Czech Republic. Without being involved in actual implementation, I cannot compare the results in Eastern Europe to the USA.

19) What is ECR and what is connection between ECR and category management?
ECR stands for Efficient Consumer Response, which requires both Supply Chain (Supply side) and Category Management (Demand side).

20) What benefits can bring implementation of category management?
Better assortment, pricing, promotions, ease of shopping for the consumer; improved profitability and reduced costs for the retailer & its suppliers.

21) What prerequisites should retailer have in order to start practicing category management?
The strategic framework and a standardized process is what you need to get started. Successful execution long term requires the development of collaborative relationships, organization structures, information systems, and metrics to measure implementation.

22) Is category management applicable for all types of retail stores (hypermarkets, supermarkets, groceries, C&C, discounters) and is it applicable for the industries outside of fast moving consumer goods (FMCG) – for example clothes, shoes, bookstores …?
Yes. The process needs to be adapted to account for different merchandise characteristics, retail format characteristics, and data availability-but the basics do not change.

23) Why lately more and more retailers and focusing on increasing loyalty of their customers?
The customer has always been the key to success in any business. New processes & enabling technologies have emerged to build customer loyalty—that’s all that is new—and is causing renewed focus! For example, it was not practical to practice Category Management without bar code scanning or Customer Relationship Management without loyalty card technology.

24) And yet some retailers and rather focusing on EDLP (Every day low price) strategy for achieving competitive advantage?
 EDLP can be the pricing tactic in Category Management—the two are not mutually exclusive!

25) To which type of retailer would you give more chance to win on the market in the long run?
The one that can retain and gain customers---all else is secondary to this one fundamental.

26) We are witnessing that negotiating power moving from suppliers to retailers. How do suppliers in the developed market respond to this challenge?
By offering better differentiation of their Brands (avoiding commoditization) and better services to the retailers.

27) How much did development of information technology (IT) changed in the retail and helped in development of category management discipline?
IT drove Category Management. The accurate measurement of product movement started with Bar Code Scanning (early 1980’s), which led to Shelf Management (late 1980’s), which led to Category Management (1990’s).

28) But Category management is not a software or technology, but primarily business strategy?
It is a business process (not strategy)—based on a customer oriented strategy. The software or technology is an enabler…without which it becomes impractical to practice Category Management.

29) What is the future of Category management?
It is here to stay and grow…as evidenced by its broad and ongoing adoption around the globe by virtually all major retailers and suppliers.

30) What do you expect from your visit to the Czech Republic and your participation in the Category Management conference and what topics will you cover on you keynote speech on the conference and on the workshop that you are having after the conference?
It is a privilege to be associated with GfK …and I feel greatly honored to be invited. I hope that my talks on the future of Category Management will accelerate Category Management development & further innovation in its implementation here.

The workshop is intended as an interactive training session for people interested in learning more about the details of implementation or in preparation for practicing Category Management.