To survive in today’s digital world, brick-and-mortar grocers and their food manufacturing suppliers need to move away from a category management business model. Instead, they need to adopt a more merchandising-focused, shopper-centric approach to retailing, according to two consultants who spoke before a packed audience during the American Bakers Association’s annual convention.
Such evolution is necessary because category management, developed in pre-internet times some 27 years ago, has become outdated. It doesn’t reflect the new dimensions and dynamics of today’s food purchasing behaviors, noted Win Weber, chief executive officer of Winston Weber & Associates and one of the architects of category management in 1990.
“We have no choice now for this industry but to change the way it’s conducting business,” Mr. Weber said. “We’ve been dealing with ‘the deal of the day.’ We’ve been dealing with ‘money, money, money’ instead of ‘shopper, shopper, shopper,’ and this industry has to become shopper-centric if it’s going to live with the Amazons of the world.”
In 2015, the Food Marketing Institute (F.M.I.) engaged Mr. Weber’s firm and Deloitte Consulting to explore the future of category management. Together, they surveyed dozens of retailers and suppliers of all sizes.
“They told us, ‘It’s time to move beyond category management, and we’re not saying this in a disparaging way,’” noted Jean-Michel Fally, principal of Deloitte Consulting. “Category management made a huge contribution, but it also needs to continue evolving with the changing environment.”
Specifically, he added, category management has limitations because it focuses on specific products and turns sections of the store, such as the bread aisle, into silos that promote one product category at a time.
On the other hand, Mr. Fally explained, the interactive shopper-centric approach takes a “whole store perspective” and seeks to merchandise complementary products to provide solutions that are more in tune with the way shoppers act when purchasing food. It looks at what time-starved consumers are putting into their grocery carts and why they are doing so to provide meal solutions for their families.
That’s a game-changer for the food industry, Mr. Weber said.
“Category management is history,” he said. “We have to move forward. We have to have our mindset on the shopper.”
The comprehensive presentation dramatically outlined how the shopping experience has evolved since category management was developed. Decades ago, retailers and their suppliers relied on spreadsheets to scrounge together data to track sales, maximize the supermarket shelf, strive to improve margins and reduce waste.
Both retailers and their suppliers now may harvest a bounty of data and share consumer insights to create retail stores that provide a more thoughtful shopping experience.
Digital media — including social media, web sites and apps — get the credit for much of the shift to a shopper-centric environment. It influences 80% of retail purchases and about half of consumers’ food purchases in more ways than one, Mr. Fally said.
In fact, the consultants’ research discovered 74% of grocery consumers know what they want before they start shopping. Approximately 57% of consumers said they are inspired by apps or web sites. Still, additional opportunity exists. Only half use their digital devices while shopping in-store while merely one-third thought that these media made their shopping easier.
Retailers and food manufacturers hugely underuse digital insights overall, Mr. Fally added. He suggested that’s especially disconcerting because the digital influence, especially among younger consumers, could even be one of a myriad of factors affecting the physical layout of supermarkets in the future.
Citing information from F.M.I., Mr. Fally said, “A confounding number to me is that 40% of the center store in grocery is going to essentially evaporate, and the perimeter of the store, which includes all of the fresh product, is actually going to take over that space … and have a profound effect on the grocery model.”
The new shopper-centric model proposes bundling products into solution-designed displays to maximize the shopper experience. However, that process requires the involvement of additional senior level managers as well as collaboration among those working in operations and merchandising to engage today’s shoppers.“They’re looking for solutions, and we have to accommodate those solutions if brick and mortar is going to survive,” Mr. Weber said.