Natural Foods Merchandiser
9 expert ways to manage categories to increase ROI

9 expert ways to manage categories to increase ROI

Strategic category management can help drive sales. Follow these expert tips to get the highest return. 

Gluten free. Raw. Functional foods. Nondairy milks. Nut and seed butters. Energy bars. Body washes. Given the incredible amount of new product launches—more than 39,000 introduced in the U.S. in 2011 and nearly 24,000 in 2012 through July, according to global market research firm Mintel—it’s no wonder retailers need a way to get a handle on the mad marketplace.

Natural industry strategic advisor

1. Mix it up.

Stock the right assortment of products to keep your current customers happy and increase foot traffic. Your mix should include top-selling items found at other retailers in your market as well as niche and specialty goods. New customers will want to search for their favorite brands before trying new products. Your goal is to satisfy all of your customers’ needs while they shop in your store.

2. Define category purpose.

Identify the role you want a category to play within your store. A category can be used to gain new customers, support routine shopping needs, create a destination for seasonal and occasional purchases, offer a one-stop shop or provide convenience. You may assign a different function to each category depending on the type of customer you want to attract. Build your sales strategies around this important step.

3. Differentiate from your competition.

Large conventional retailers do a lot of things right. But instead of competing with them on price alone, focus on what natural products stores can do better, such as offering superior customer service, knowledgeable sales support, healthier products, community commitment and more selection. In other words, exceed your customers’ expectations. 

–Daniel Lohman, owner of Category Management Solutions in Littleton, Colo.

Natural products retailer

4. Connect with customers.

Take time to study customer shopping habits and trends. Make sure you have the most sought-after products, staples for each category and an assortment of great deals. Many of our shoppers tell us what they need and desire, and they know we will do our best to get these goods. Because of this dynamic relationship, customers return and our product selection stays up to date.

5. Offer variety within each category.

Having something for everyone within a category is most likely to ensure customer purchases. Although some shoppers may simply want a basic value product, plenty will pay more for an organic or fair-trade item. Still others may take it to the next level and look for imported or gourmet options. 

6. Optimize volume purchases.

The bigger the buy, the better the deal, and therefore, the more flexible the margin. If you build a partnership with manufacturers that can count on you to make regular large purchases, you will gain wiggle room in your product pricing. All pricing requires regular evaluation, but supporting key product purchases with promotions for the season (or as needed) will keep customers coming back.

–Mo Payette, chief operating officer and director of purchasing for Mother’s Market & Kitchen in Costa Mesa, Calif.

Category management specialist

7. Use store-by-store planograms.

Changing the planogram—a visual depiction of product placement—to meet local demand will increase sales and profits. Start with a set of planograms for a category that are based on store clusters, and then use store-level consumer data to make assortment and shelving decisions. Store-specific planograms ensure optimum supply-chain efficiency that results in higher availability of the right products and the most efficient use of space.

8. Understand loyal shoppers.

Data from consumer panels and retailer loyalty cards give you an in-depth understanding of your target consumer across categories. With this information, tailor platforms, assortments, shelf sets and merchandising, as well as in-store environments and marketing to meet the needs of these loyal, or “heavy,” shopper segments. Develop a strategic plan for meeting their needs, then align with suppliers who have mutual core consumers.

9. Analyze retail promotions.

Invest in software to plan and model retail promotions, evaluate the success of past promotions, manage trade spend and react quickly to competitive activity or vendor opportunities. This effort will lead you to spend company and trade dollars more effectively.

–Sue Nicholls, president of Category Management Knowledge Group in Calgary, Alberta, Canada

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