Jewellery majors add regional touch to brighten sales.

LEADING jewellers are discovering the fact that it pays to play the regional card for sales to shine brighter. Players like Tanishq, Orra and Adora are all reaping dividends by tweaking their assortment and designs to suit regional tastes. Through this, they hope to grab a bigger share of the consumer’ wallets by offering a broader product range and more depth in various categories.

Tanishq, for instance, has identified top 20 communities and started stocking merchandise in each store geared at them. This initiative is aimed at helping the brand to become a bigger player in the roughly Rs 45,000-50,000 crore Indian wedding market.
“We will now be stocking wedding collections targeted at specific communities,” said Tanishq vicepresident (retail and marketing) Sandeep Kulhalli. “After starting in the South, we are now looking at north India. After building enough merchandise, we will start marketing efforts geared around that,” he said.

Ajay Mitra, MD, India sub-continent, World Gold Council said: “The impulse buy category is usually domi
nated by career-oriented women who have a commonality in likes and dislikes, which cuts across regional nuances. But, from 35-45 onwards, there is a strong orientation towards regional tastes, most of which are hand-crafted intricate designs.”

According to Mr Mitra, national chains have studied the business models of large successfully-run regional
players which are doing very well. “From our interaction with some of the big jewellers, I think they have clearly identified large buyers — communities which have allocated a large chunk of their marriage spends to gold jewellery.” It’s not just at the design level that regionalisation is happening either. According to Orra CEO Vijay Jain, “It’s happening even at a diamond level, where customisation is in fact higher.”

Jewellers ET spoke to claimed that while people in the South prefer a higher quality of diamonds, those in the north go more for
flash, at cheaper prices. So, IF (internally flawless)/ VVS (very very small inclusions) clarity diamonds sell better in the South while VS (very small inclusions)/SI (small inclusions) clarity diamonds are more popular in the North.

Wal-Mart updates its look.

WORTHINGTON, Oct 27, 2008 (The Daily Globe – McClatchy-Tribune Information Services via COMTEX) —
Nine years ago, Worthington became home to the first Wal-Mart supercenter in Minnesota.
That was a long time ago, however, and according to current store manager Jeff Fouch, it’s time for a change. That’s the main reason why Worthington’s Wal-Mart recently underwent an extensive remodeling celebrated Wednesday with a grand re-opening ceremony at the store.

While Wal-Mart was never closed during the renovations, Fouch pointed out the new-look store now offers plenty of conveniences for shoppers.

“Nine years ago, when the store was built, shopping patterns were different,” said Fouch, who became store manager in March after having spent two earlier stints working at Worthington’s Wal-Mart. “For example, our electronics department wasn’t very big, and we didn’t even have the capacity of displaying LCDs or plasma TVs because we didn’t have the power for it. Also, the department just needed to be expanded — all of that area is growing, and we couldn’t hold everything we needed.” Continue reading

Category Management: The Road Ahead

Win Weber’s Leading Edge Perspective

Category management, which is based on sound business principles, has heightened awareness of the importance of category level planning, and it has changed, for the better, behavior throughout the industry. It is producing favorable results with a vast majority of those retailers who are implementing the concept. There are countless examples of how category management has contributed to sales and share growth, reduced costs, improved profits as well as how it has influenced customer count, transaction size and market basket composition.

Despite the many successes, the concept is receiving mixed reviews from both retailers and suppliers. Retailers are concerned about the exhaustive resources required to implement the textbook version of the concept, and the apparent inability of suppliers to remove brand biases and truly focus on total category performance. Suppliers are questioning the return-on-investment for resources deployed to support category management initiatives. Whatever the case, there is a growing consensus that while the concept is producing favorable results, it is falling far short of achieving its fullest potential.

When category management is not measuring up to expectations, the causes can usually be found in one or more areas related to the implementation practices being pursued: the retailer has not been able to translate the “Best Practices” textbook to practical application; there is no formal retailer/supplier collaborative relationship strategy, plan or commitment across the organization; the focus is more on internal measures than on the consumer, and category plans are poorly executed at store level.

Our perspective regarding each of these areas follows:

· The publication of industry “Best Practices” four years ago established a common understanding of category management as well as standardized practices. A good “starter kit” that is must reading for all beginners. But over time this textbook has proven to be too theoretical, too comprehensive and template driven. It does not provide adequate guidance on how to translate theory from the classroom to practical application in the marketplace. Consequently, those retailers who are trying to follow the “Best Practices” guidelines are having difficulty doing so within existing resources and capabilities. Several leading retailers have flatly rejected the guidelines. This has led to broad ranging applications and considerable compromise of the concept. We have learned, beyond a doubt, that one size does not fit all. In fact, a recent industry survey indicated that less than ten percent of retailers are following the guidelines.

It appears that category management may be moving forward like a rudderless ship in the sea… with a dire need for course correction. The direction must shift toward practical application with specific guidelines to tailor the concept to fit individual retailer situations.

· Establishing collaborative relationships between trading partners is an essential component of category management. Collaboration aligns strategies, systems, processes and people for the sole purpose of reducing the cost of conducting business while better serving the consumer. There has been good progress in this area driven primarily by technology and logistics initiatives. Overall, relationships between trading partners have definitely improved. But not to the extent required to support the evolution of category management.

A very small percentage of retailers are doing it right. A large number of retailers do not believe collaboration is an important part of the category management process; some believe in collaboration only when it is self-serving; few have formalized collaborative relationship strategies and plans; and investment in upgrading collaborative skills is limited to a handful of retailers. This situation is compounded further by behaviors such as charging slotting allowances, charging for category captaincies and diversion of product.

In many instances, supplier behavior is also undermining the concept. This includes marketing programs and policy decisions that erode retailer profits, inconsistent business practices across markets, channels and retailers, as well as quarter-end-load programs designed to shift inventories instead of building consumption. The inability to put brand biases aside and focus with the retailer on total category performance is also an issue. Over 80% of retailers surveyed say suppliers are too brand biased when participating in joint category planning.

Most relationships between trading partners have only moved to a more sophisticated level of the traditional buyer/seller relationship. A few have reached the level of true collaboration. There is still a long way to go to achieve the levels of collaboration necessary for both parties to achieve the full benefits of category management.

· During the past nine years we have stated time and time again that unless the focus is on consumer satisfaction, category management will not deliver the desired return-on-investment for retailers or suppliers. Unfortunately, our warnings went unheeded. The emphasis has been on cost management, not on the consumer. The majority of retailers practicing category management have been focusing on internal measures instead of using balanced scorecards that include consumer based measures. The pressure on category managers to manage margin percentages and achieve buying income goals has resulted in short term decisions based solely on cost… at the expense of good consumer based decisions that deliver quality sales and profits.

This internal focus has also been a key barrier in moving collaboration forward to a higher level.

As we look to the future, we are very encouraged by an apparent shift in focus toward the consumer. A growing number of retailers are investing more on consumer research, upgrading marketing competencies, taking advantage of supplier consumer knowledge and encouraging suppliers to invest in retailer specific consumer research at the category level. A few progressive retailers are routinely analyzing the composition of the market basket and incorporating consumer loyalty program data into the category planning process.

Several retailers are moving away from their traditional category management structures to more advanced concepts that better position them to “touch the consumer.”

These are encouraging developments that we hope will continue.

· The ability to execute category plans at store level is a real dilemma and the potential Achilles heel of category management. Most retailers are spending an exorbitant amount of time preparing category plans, but not enough time on store execution. Consequently, new item speed to market plans, planograms, promotions and other initiatives are executed poorly, and sometimes not at all. As we tell many clients, “Don’t allocate resources to developing category plans unless you can execute at store level. It will be a waste of time and money.” We are now at a stage in the industry when there are many questions regarding whether the retailer, supplier, broker or other third party is responsible for store level execution… and who pays?

We find that many store execution issues are directly related to business process and activity ownership. The category management concept has never been presented to most store managers, so they do not know its value relative to their specific stores or the company, and they are not aware of the plans for signature and priority categories. Thus they seldom accept ownership of the execution of category plans. In addition, there is often a misalignment of key performance measures and business processes between category management and store operations. Merchandising standards are often poorly defined and compliance disciplines are not in place.

Only a few retailers are positioned to execute category plans effectively. For most, this is a major problem that must be addressed.

Having said all of this, we believe the road ahead is very encouraging, and the direction is quite clear. Category management will continue to evolve as a way of conducting business, but more as a part of a total business process. The charted course will not be any easier than the journey to its current state… there will be speed bumps and land mines along the way. Here’s how we see the future:

· Category management will evolve to where it will simply be referred to as category planning, an essential component of total business planning, by retailers in its advanced stages of implementation. The emphasis will be on a fully integrated business planning process. Beginners will continue to call it category management.

· Category management will evolve from the “Best Practices” guidelines to a value-based opportunity focus that puts much greater emphasis on the business question to be addressed, the need to know information, better allocation of resources and simplification of the planning process. It will deliver a much higher return on resources deployed by both retailers and suppliers.

· Retailers will focus their category planning processes more on the consumer, with a significant increase in the utilization of consumer information for strategic value and tactical application.

· Retailers in advanced stages of implementation will internalize the annual category planning process. Suppliers will be used as a resource to provide consumer data and gather market level information to support the planning process. Suppliers will be involved in joint category planning only when the retailer needs to address major opportunities. Suppliers will continue to be actively involved in joint planning with retailers at the beginning and mid stages of implementation, and with retailers who do not have sufficient resources to “go it alone.”

· Retailers in advanced stages will integrate the chainwide advantages of category management with a market focused process designed to align category planning with store cluster and store specific planning. In other words, planning will move closer to the consumer. This will require the evolution of organizational structures, roles and responsibilities beyond the current textbook guidelines.

The alignment of category planning with local market and store specific planning will heighten the importance of timely and efficient execution at store level.

· The rules of collaboration will be redefined and will more clearly align expectations between trading partners. The level and type of collaboration will depend, for the most part, on who most directly influences consumer behavior… the retailer or the supplier. In addition, activity based costing will become a more important component of the collaborative equation.

· The evolution of category management will place new demands on suppliers and brokers. The changing roles and responsibilities of multifunctional teams will lead to organizational restructuring. The store execution dilemma may necessitate a major reallocation of retail resources. And, the role of brokers has yet to be defined. There will be much greater emphasis on maximizing efficiencies, allocation of resources, and return on investment.

If retailers and suppliers pay attention to our learnings to-date, with an eye on the road ahead, category management can measure up to initial expectations. This means moving beyond current implementation practices and making those changes required as the concept evolves to where it is an essential component of a retailers total business planning process.

ABOUT WINSTON WEBER & ASSOCIATES, INC.

Winston Weber & Associates, Inc. (WWA) is recognized worldwide as a leading architect of category management and the one consulting firm that knows how to translate the concept from theory to practical application. The two retailers in the U.S. that industry surveys identify as the best practitioners of the concept are WWA clients. Clients also include a select list of retailers across trade channels, manufacturers, brokers and industry associations. WWA is a global management consulting firm with current clients in the U.S., Canada, Latin America, Asia, and Australia. For further insight into Win Weber’s leading edge thinking, please contact us in one of the following ways:

Phone (901) 763-0263
Fax (901) 767-4157
Emai: winweber@winstonweber.com
Website: http://www.winstonweber.com

FMCG firms take to brand valuations

A few months ago, Godrej Consumer Products (GCPL) wondered why its Cinthol brand was growing slower than fellow soap brand Godrej No 1. In its quest for the answer, it embarked on a valuation exercise and came up with a revelation.
 
The potential value of its top five brands – Cinthol, Fairglow, Godrej No 1, Ezee and Godrej Powder Hair Dye – was Rs 3,900 crore. Their realised value at that time was pegged at only Rs 2,600 crore.
 
This had a significant influence on Godrej’s strategy. The thing to do was to take steps to ensure higher performance through more “consumer offers”, like advertising to customers, than “trade offers”, which are to retailers.
 
“The guidelines suggested by the exercise will help us keep adding value to our brands,” says Hosehdar Press, the company’s executive director and president.
 
GCPL has also decided to publish a detailed report on the exercise in its annual report.
 
Brand valuation measures mainly two criteria – the potential profitability of the brand and non-financial factors like brand recall as compared with competitors.
 
In India, such exercises have been undertaken mostly by large conglomerates, such as Tata, since it is easier to quantify the royalty to be charged from group companies using the corporate brand name.
 
However, of late, companies across sectors, especially fast-moving consumer goods and telecommunications, have been valuing their individual brands.
 
In the FMCG sector, brand valuation used to be popular mainly among multinational companies. However, sources say a clutch of home-grown entities are taking the route.
 
Among these companies are Marico, Dabur India, Sun Earth Ceramics (the maker of Sonora tiles), Cholayil (the maker of Medimix) and personal care services firm VLCC.
 
Disclosing the value of brands enables companies to have better investor relations and consumer perception. It also helps in tackling corporate litigations considering the rise in trademark cases, say companies.
 
For Surya Foods, the maker of Priyagold biscuits, this exercise was a precursor to the initial public offering. The value ascertained by the company for its brands was Rs 1,200 crore.
 
“We undertook the exercise to give a better picture to our potential consumers, distributors and retailers about the value of our brands,” said B P Agrawal, the company’s managing director. The company will use insight from the exercise to implement expansion plans nationwide.
 
Experts say brand valuation is more than a mere marketing tool: it has become a key management application.
 
For multinational companies such as Coca-Cola and PepsiCo, brand valuation is central to the strategy, which determines their marketing spend for each brand and gives them a competitive advantage. It is also a significant contributor to enterprise value.
 
“For Indian companies to partner the International Financial Reporting Standards (IFRS), brand valuation is crucial,” says Sanjiv Agrawal, partner, Ernst & Young.
 
“It helps companies to take key corporate decisions like selling a brand, setting up a joint venture, an acquisition, or towards improving brand performance. It’s also a check on the performance of their brand managers,”
 
“With more companies getting listed, or heading abroad to raise capital, and a flurry of mergers and acquisitions, global accounting standards expect companies to be transparent about their business operations, which includes listing brand valuation figures in financial statements,” said Unni Krishnan, managing director of Brand Finance India, a global brand consultancy company.
 
“There is also a growing realisation among companies that cutting costs is not the only way to create value. While brands are intangible assets, they are central to businesses like in the FMCG sector and, therefore, cannot be left unaccounted for,” he said.

The Business Process of Category Management

SAP for Retail solutions cover the key processes in category management, including:

  • Strategic planning – SAP for Retail helps you develop your rolling three-year strategic plans by providing historic data analysis capabilities as the basis of forward projections, and enabling you to build financial models of various potential plan scenarios. With SAP solutions, you can analyze prior financial performance, customer trends, and your competition, and develop alternative forward plans.
  • Category business planning and management – With SAP for Retail, you can plan the selection you will carry for the next season or year (private-label goods, seasonal, or basic items), determine financial targets for that selection, and then manage the achievement of those targets. SAP solutions support key tasks, such as category planning, product hierarchy definition, initial product order placement, initial allocations for new articles, performance tracking, and new product development.
  • Price and revenue management – SAP for Retail helps you optimize and manage prices throughout the product life cycle, including initial pricing as well as promotional, markdown, or clearance pricing. Once prices are optimized to be consistent with your unique customer demand, you can change prices individually or via automatic mass maintenance based on pre-specified dates, by item, store, zone, or region. Prices can be downloaded to stores with start and end dates and times for automatic management of the complete pricing cycle.
  • Promotion planning and management – SAP for Retail solutions enable you to plan, execute, and evaluate the success of promotions. With SAP solutions, you can plan individual promotions, determine promotional order quantities, place promotional orders based on historical information, allocate promotional inventory, and evaluate the success of your promotions.

Category management is enabled with SAP applications such as SAP Customer Relationship Management and SAP ERP. To find out how these applications can improve your category management, please complete the “Contact SAP” form and request information about customer relationship management or enterprise resource planning.

Enabling Category Management with Space-Time Intelligence

By Nicholas Jacquez , TerraSeer
Category management is the process of identifying and managing product categories as strategic business units, rather than simply viewing a retailer’s offering as a collection of individual products. The category management approach delivers enhanced business results by focusing on delivering consumer value. It is often a shared process between a retailer and its vendors. This description comes from Category Killers (2005) by Robert Spector:

For the past couple of years, the term “category management” has entered the retail lexicon in virtually every merchandise category. Category management began in the supermarket business, where big retailers of packaged goods learned that they could improve sales and profits if they could more efficiently administer all their different product classifications. The idea was to oversee the store not as an aggregation of products, but rather as an amalgam of categories, with each category unique in how it is priced and how it is expected to perform over time.

One vendor is designated as “category captain” and charged with helping the retailer define the category; determine its place within the store; evaluate its performance by setting goals; identify the target consumer; divine the best way to merchandise, stock, and display the category; and then influence the implementation of the plan. Becoming a captain is obviously an important position because it offers that supplier an opportunity to sway a retailer’s buying decisions.

This article introduces the concept of “space-time intelligence” as a basis for building excellence in category management and provides an overview to a three-tier approach for building a space-time intelligence-enabled management process. It will also provide detail in an example of the essential first tier: visualization and analysis to drive understanding of store level transaction data. (Author’s note: Two more articles are planned on this topic, which will expand the discussion of steps 2 and 3 in the process, including examples of demographic and market landscape predictive analytics.)

Space-Time Intelligence
Among other measures, retailers need to look at sales and traffic counts by store, by region and by time period. Restaurateurs and convenience retailers talk about “dayparts”; radio programming and outdoor advertising placements are designed to catch the morning and evening “drivetimes.” In government, census data are gathered periodically and analyzed to reveal trends over time and geography. Time, from season of the year to time of day, is an essential component in understanding the context that drives real world phenomena, from demographic trends to retail business results.

Unfortunately, the tools we use to visualize and analyze marketplace data do not deal with time in a fluid and graphic manner. GISs are designed for the visualization of spatial data and are not well suited for space-time data. For example, if you want to look at data over multiple time periods in a GIS, you generate individual maps for each time frame (even of the same geography) and look at each separately; or go outside the GIS to build a “flip chart” using Microsoft PowerPoint or a .gif “animator” to view them in sequence. The business world, however, is dynamic. Consumer purchases occur at various points in geographic space and time, captured at the store register as POS (point of sale) data. GIS maps and standard spreadsheet-style analysis tools are static, so they cannot easily reflect the dynamic nature of retail data.

The answer to the problem of GIS not incorporating time is to develop a new type of information system. The TerraSeer Space-Time Intelligence System, or STIS, is an analysis platform developed specifically to address this need. STIS is not a GIS, nor is it based on GIS technology – it is a proprietary technology in which time is native to the data structure, creating a spatiotemporal (space-time) data construct. As a result, we can represent and analyze a dynamic marketplace with a tool that is similarly dynamic. In addition to its space-time data structure for animated data visualizations, STIS links multiple data views (maps, graphs, tables, etc.) so that features highlighted in one view are simultaneously highlighted in all others, allowing intuitive data exploration.

The implications for business decision making are clear. Maximizing value delivery to consumers is the key to category management and that depends first on in-depth understanding of how product and category purchases occur at store level, through time, and the relationships between those purchase patterns and the dynamic consumer and competitive landscape.

A Three Step Process
In our work with manufacturers, we focus first on the level of data that is most difficult to see and analyze using current GIS and BI solutions, store level transactions as they change and grow through time. Once we visualize and understand store level transactions, higher levels of predictive analytics are added in levels 2 and 3.

Table 1 below shows the three-level concept as applied to a manufacturer of consumer durables. The table shows typical users at each level, the types of inquiries they make, example questions, data required, purpose of analysis outputs, and benefits to be derived.
Note that while user types, analysis purpose and benefit statements are presented from a manufacturer’s viewpoint, they coincide directly with retailer category management objectives as expressed in this article’s introduction.

Level 1 in Greater Detail – Visualizing What, When and Where
In the following example analysis, we focus on five products that a retailer has said it wants to discontinue. Since the retailer made this decision just prior to the beginning of the key season for this product category, the manufacturer has already loaded its warehouse with product from China that can not be returned. If the retailer refuses to take this warehoused product, the manufacturer will be sitting on $400,000 worth of inventory. Selling to other retailers is possible but not probable, as this retailer is the largest customer for the category of products represented. However, the retailer has agreed to consider options for liquidating the inventory. TerraSeer’s proposal to the manufacturer is to use visualization and analysis of store level data to find the “80/20” rule; the 20% of stores that comprise 80% of the sales for these items. We can then place specially priced in-aisle display shippers of the five items in those high volume stores, yielding the shelf space to higher velocity items. This will satisfying the retailer’s shelf productivity objectives, deliver value to consumers across the store spectrum and solve the manufacturer’s $400K inventory problem, all by putting the right products in the right place at the right time.

The animated screen capture (3 MB .wmv file) shows an analysis of the five items in question in California stores over the past several years. We begin with a simple map of California at screen left, showing stores as squares of various sizes. As sales of “Item E” grow month to month, the squares get darker and larger in size. Two Scatter Plots showing Monthly Sales of Item E vs Total Store Sales and Category Sales vs Total Store Sales are shown at top right, allowing the user to understand sales behavior of the individual item relative to the category as a whole. A Data Table and Box Plot are shown below. We animate the sales sequence by clicking the “Play” button at top center. On the map, it is easy to see the stores where item E does well, as sales change month to month. It is clear, especially as we zoom into the map, that there are a number of stores where this item never sold well and others that did the majority of Item E volume. We stop the animation and highlight the top stores by “brushing” the Box Plot. The top stores are highlighted in all views and several clicks on the data table easily select the stores for fulfillment activity.

Next we scroll to the right to see an analysis of the other four items. These are arranged with a Map and Histogram for each of Items A through D set up at the corners, surrounding a Product Mix Plot at screen center. Again we animate the monthly sales data by clicking the play button and can quickly see the store level sales dynamics through time. The Product Mix Chart and/or Histograms can be brushed at any point in time to identify the target stores for each item. Finally, we see a Seasonality Plot that shows the level of sales month by month for each store.

Ongoing Category Management that Delivers Ongoing Savings

Achieving cost reductions is one thing. Continuously building upon those savings and driving additional performance improvements is another matter. It requires continuous monitoring of the market and supplier performance by experts who know the category and the supply base. Unfortunately, few companies have the resources to apply this level of attention to the majority of their categories. ICG Commerce, on the other hand, addresses this challenge by providing seasoned professionals with deep category experience and proactive category management support that produces incremental savings and performance improvements year after year. 

Category Management: Expert insight and resources to unlock additional savings

By analyzing detailed spend, transactional and pricing data, and continuously monitoring the supply markets, our dedicated category experts routinely identify and implement solutions to further reduce maverick purchasing and drive incremental unit-cost reductions through additional sourcing, appropriate specification changes, substitution, better demand management, and actively target cost-avoidance opportunities in appropriate commodities.

  • Price Management -Monitoring of category indices and analytics on impending price changes
  • Supply-Market Monitoring and Reporting -Continuous analysis of spend, market data, and benchmarks to identify additional improvement opportunities
  • Continuous Cost Improvements -Implementation of additional savings through substitutions, better compliance, or additional sourcing
  • Supplier Performance Management -Monitoring supplier performance and driving quality and service improvements

To further improve supplier compliance and performance, our seasoned category managers constantly monitor a number of key metrics and produce quarterly supplier scorecards to ensure your suppliers are performing at the highest level. The scorecards include spend, savings, transaction volume, and quality metrics such as:

  • Calculating spend vs. plan (compliance)
  • Quantifying realized savings vs. plan
  • Tracking electronic transaction (PO, POA, ASN, Invoice, Credit, Return) accuracy and timeliness
  • Recording order fill rate, fill-cycle times, and freight-term compliance
  • Identifying exceptions by type (damaged, incorrect items, overage)

Managing non-strategic categories, strategically

Category management support from ICG Commerce delivers year-after-year cost improvements to help you maximize savings opportunities across all categories while focusing your internal efforts on larger, more strategic savings initiatives. This support includes:

  • Validation and management of pricing in the years after the initial supplier agreement
  • Comprehensive spend and savings reporting to identify and address maverick buying
  • Identification and implementation of additional savings opportunities such as product substitution and OEM price support
  • Operational improvements such as optimizing order size and reducing the number of supplier invoices
  • Reduction in time and effort driving supplier performance improvements and resolving supplier issues
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