Why read this? : We look at the role of e-Commerce category management in working with online retailers. Learn the different skills involved, and how to create a common goal and unified approach. Read this for ideas on how to master the challenges of e-Commerce category management.
Selling to retailers used to be a fairly simple process. The supplier’s sales person met with the buyer. They negotiated a deal on quantity and price. Transaction done, there was a handshake and maybe a celebratory drink afterwards. Simple.
It’s a bit more complex these days. The way suppliers and retailers interact has become more of a challenge. There’s higher expectations. More sophistication in the negotiations and planning. And more emphasis on building relationships.
Managing the Category
The topic of conversations’s changed from buying and selling to growing the category.
This idea of Category Management dates back to the 1980s (first coined by Aussie business professor Brian Harris). It’s part of a push by an increasingly competitive retail industry to find better ways to grow its business.
The basic premise is retailers break up their portfolio into categories. Their category team work with suppliers to find ways to grow that category.
They expect these suppliers to be business partners to help them grow the whole category, not just the supplier’s range of products.
In many big businesses now, the core sales team is a :-
- National Account Manager – manages negotiations and the smooth running of the business.
- Category Manager – leads all category management activities. This includes planning, data and analysis, and making recommendations on how to grow the category.
They’’ll be supported by internal experts in :-
- space planning (how to stock the shelves).
- promotional planning (when to run price discounts and special offers).
- shopper insight programs.
They may also have Regional or Field Sales managers who organise teams to go into stores and manage individual displays and stock.
The retailer will still have a buying team, but they’re rarely just called buyers these days. Their title usually refers to their level in the business (e.g. Senior Buyer, Assistant Buyer) and / or the category they buy for. (e.g. Wine Buyer, Fashion Buyer or Accessories Buyer). They’ll also be supported by their own experts in space planning, insights, data analysis and operations.
E-Commerce Category Management
The rapid growth in e-Commerce has made category management even more complex.
This new way of selling has to fit into the supplier – retailer relationship. And that’s a challenge because selling online isn’t the same as selling in-store.
Yes, they’re both “selling”, and have some elements in common. But there’s a whole bunch of new factors to consider to make selling online work properly.
So, you have a choice.
You get salespeople, category managers and buyers who know how to sell in-store to learn this new area. Or, you use e-Commerce experts to do online category management for you.
Which you choose comes down to the context of the category, and the skills and motivations of the people in each team.
Category Management leads e-Commerce approach
If your category sales are mainly in-store, you’re more likely to see e-Commerce as an added extra to your category management plan.
You’d treat online as an extension of the retailers core offer. Similar to how you’d tailor your approach to them having different size store formats or different customer segments.
Strategic-thinking category managers are able to step back and look at the bigger picture here. They take a long-term view of where e-Commerce fits in each retailer’s plan.
They recognise e-Commerce is seeing fast growth. And that it’s usually seen as an easy, convenient way to shop by the retailer’s customers.
Pros of this approach
There’s some definite benefits to having your category management team lead e-Commerce with the retailer.
First, it means you have one overall business approach with that retailer. That keeps your strategy and story simpler and easier to remember. That usually makes it easier to put your plan into action.
It also means your offline and online activities with that retailer are more integrated. What the shopper sees in-store and on the retailer website match. This reinforces your messages and positioning.
It also usually means better integration of data and results. For example, you get more clarity on how offline and online activities work together in areas like customer loyalty and their response to sales promotions.
It also means there’s less people in the conversation. That means decision-making is easier and faster.
Cons of this approach
The challenge is that category management and e-Commerce are different skills.
They share a few common areas. Insights, selling psychology and number crunching, for example. But there’s also many differences.
So, unless your category management team have trained in e-Commerce, they may well not have the capabilities to optimise your online selling.
For example, they may not know e-Commerce insights and what online shoppers want.
They may not be clear on the e-Commerce customer journey, and the role of skills like digital media, SEO and product page set-up. Plus, they may not understand how to manage all the back-end technology systems like order to delivery.
Of course, they can learn these areas. But they then need to integrate this new learning with all their traditional category management skills. That’s not always easy. Most category managers have some knowledge of e-Commerce, but few have deep expert knowledge.
Plus, unless the retailer is a Pure Player (see our online retailers guide for more on this), in-store sales will usually be more than they sell online. So, it’s natural Category Managers would focus more on in-store sales as it’s a bigger opportunity. That can mean you miss out on online opportunities.
Often when this happens, e-Commerce just becomes an advertising and promotion channel for the category management team. The online equivalent of retailer catalogues. So, not somewhere they build great experiences for customers and come up with breakthrough ideas.
E-Commerce leads category management approach
The other option for e-Commerce category management is to have e-Commerce experts lead your e-Commerce planning first. Then, you build that into your category plan.
This can be a more impactful approach if the retailer is a Pure Player, or most of its sales are online.
You craft this e-Commerce category management plan for the retailer using expert knowledge of relevant areas. For example, store websites, online shopper insights about the customer journey, and how to set up and use marketing technology.
Pros of this approach
The obvious benefit here is you maximise the online selling opportunity.
You bring the right skills to optimise the retailer’s online selling approach. That means optimising both the front-end customer journey and the back-end technology and systems.
It also means you have better quality conversations about specialist digital areas. SEO or CRM, for example. Everyone has the right knowledge level to talk about those areas. They speak the same e-Commerce language.
There’s no need to slow down to explain terms as you sometimes have to with traditional Category Managers. E-Commerce runs at a faster pace than category management. For example, the retailer can update category listings and product information in real time if needed. Compare that to shelf range reviews in-store which are usually planned at least 6 months in advance.
This approach also works well if most of your brand marketing activity is online. It makes it easier to co-ordinate and integrate key digital activities like digital media, SEO and website links.
You use your brand digital activities to support and enhance the retailer’s online customer experience. This drives more traffic and conversions for your products on their site.
Cons of this approach
The down side of this approach is when it pulls too far away from any non-digital work you do with the retailer. Then it starts to clash.
Very few categories are purely online. Most will use at least some sort of offline activity to drive awareness and consideration. It can be harder for e-Commerce focussed teams to see this bigger category management approach.
You lose all the benefits you get when you do category management first, and then plug e-Commerce in. The simple integrated story, and the consistency in execution, for example.
Building an e-Commerce category management plan
Whichever approach you choose (and it’s often a mix and match of both), the next step is to plan your e-Commerce category management strategy.
This usually means defining a category vision, category growth drivers, and pulling in e-Commerce experts to make sure it gets the right level of expertise and focus.
The category vision is usually (but not always) done with an external category management agency. They guide you through a specific process.
It usually starts with pulling together insights about shoppers, the retailer and other societal and cultural trends. They provide a category framework they know works with retailers, and a process to help you fill in the details of that framework.
Category vision
The vision is normally summed up in an overall category vision statement. This is a short sentence which paints a picture of what the category will look like in 3-5 years time. It’ll be something along the lines of :-
Our vision is to grow (name of category) by (doing headline activity) delivering (result) by (deadline).
Obviously, it’s usually more crafted, snappy and memorable than that. But to be honest that’s the outline structure of most category vision statements we’ve seen.
Category growth drivers
Underneath that vision statement, the main activities are then split into category growth drivers. (sometimes also called category pillars). These cover the big things the category plan recommends doing to deliver the vision and drive growth.
There’s usually around 5 of them. They’re given easy to remember names which describe the goal or general area of activity. For example, “build my confidence” for activities to support educating shoppers. Or “tailored solutions” for when you want to offer more specialised or personalised products.
These growth pillars can cover new product areas, bringing in new customers or changing the way the category works in a breakthrough way. The Ansoff matrix is sometimes used to help generate ideas on where to find these sources of growth.
E-Commerce sometimes fits in here as a growth driver. This would be the normal approach if the retailer isn’t advanced at e-Commerce, and you have good e-Commerce capabilities you can share with them.
Making it a separate pillar helps it stand out. It makes sure e-Commerce doesn’t get overlooked.
However, sometimes e-Commerce is seen as an enabler for all the other pillars. So e-Commerce and all it implies (websites, order to delivery, online selling techniques), becomes a support for the other growth drivers. This is a better option if the retailer is already advanced at e-Commerce. It’s already part of their normal operations and doesn’t need to stand out separately.
How to make e-Commerce category management work better
We’ve seen both category management led, and e-Commerce led approaches work well. However, there are always challenges when you try to pull together teams with different goals and skillsets.
To close this article, here’s 3 thought-starters to keep in mind when trying to work out the best approach for e-Commerce category management :-
- Establish a common goal.
- Define roles and responsibilities.
- Continuous learning is key.
Establish a common goal
It’s easy for category management or e-Commerce teams to think the goal is to drive “their” part of the business. That’s usually because their personal goals are geared towards doing something specific in their area of expertise.
But the overall goal has to be doing what’s best to grow the business and get the most out of the retailer relationship. So both teams should get together first, and agree what this goal looks like. Only once you have that common agreed goal do you then work out what’s needed from each team.
That way you’re more likely to get teams working together to achieve bigger business goals, than against each other to hit their own goals.
Define roles and responsibilities
From those goals, you can then define team roles and responsibilities. You nominate an overall leader, (usually the National Account Manager), who works with the team to define who does what with the retailer.
The aim’s to use the right areas of expertise at the right times. You want to present a united and compelling story. Remember, you’re usually going up against competitors for the retailer’s attention and support. To give yourself the best shot at getting the retailer to buy into your category plan, you want to come across as credible, consistent, and collaborative.
The team leader gets the final call on key decisions as they’re ultimately accountable for the results. But they work with the team to make sure those decisions are based on the right facts, insights and expertise.
Continuous learning is key
In terms of how businesses work, e-Commerce and category management are both still relatively new selling skills. After all, people have been selling for thousands of years. These skills which emerged in the 1990s are still “young” in terms of sales expertise.
That means they’re continuing to evolve, so there’s always more to learn about them. E-Commerce teams have lots to learn from how category management works, and vice versa. You should ask teams to share their expertise to get everyone to the same level of knowledge.
You could even go as far as moving people into different roles. Move Category Managers into an e-Commerce role for 6-12 months, for example, so they learn the intricacies of online selling. Move E-Commerce managers into Category Manager roles, so they understand the challenges of working with retailers and being more commercial.
Continuous learning is key here. Keep experimenting with different approaches. Do more of the things that work, and less of the things that don’t. The details of how you do it might feel complex, but the overall approach shouldn’t be. When e-Commerce and category management work well together, you drive more online sales. That’s good news for you and your retailers.
Conclusion - e-Commerce category management
E-Commerce category management brings together 2 separate skills to help manage your online business with retailers.
For suppliers, category management is about working with the retailer to grow the category. It’s usually led by a specialist team who make recommendations on how to grow the category.
E-Commerce can be its own growth driver within that plan, or set up as an enabler to support the other growth drivers.
However you bring e-Commerce and category management together, it’s important to make sure everyone agrees on the overall goal. This makes sure everyone pulls in the same direction, and makes decision-making clearer. Everyone should be clear on their roles, so they know what they’re expected to deliver.
Both e-Commerce and category management are relatively new skills. They’re continuing to evolve, so the different teams should see this as an opportunity to learn from each other. You get the best e-Commerce category management plans when you pull together the best parts from each skill.
Check out our e-Commerce capabilities article for more on this topic. Or get in touch if you need help building your e-Commerce category management plan.
Photo credits
Supermarket : Photo by Hanson Lu on Unsplash
Person holding compass : Photo by Aron Visuals on Unsplash
Thumbs up / down (adapted) : Photo by Markus Spiske on Unsplash
Online shopping with phone and credit card : Photo by PhotoMIX Company from Pexels
Credit Card / Laptop : Photo by rupixen.com on Unsplash
Lens : Photo by Paul Skorupskas on Unsplash
Three people pointing at laptop : Photo by John Schnobrich on Unsplash
Two people working together : Photo by Nik MacMillan on Unsplash
