What is Retail Category Management – Tips and Tools

Introduction

Hello Retailers! As experienced Retail Software experts, we at Ari have been working with over 2000+ Retail Businesses. And we understand how Retail category management becomes a mammoth issue specially when you are managing large multi-store retail chains.

Retail category management is creating a strategic approach to segmenting products according to the target audience. Moreover, effectively sourcing products and increasing the profit margin is essential. However, manually performing this activity is quite hectic and stressful, so investing in retail category management software is the best-considered option for retailers.

We have curated this article to provide insight into category management in retail and the key tips and tools of inventory management.

What is Retail Category Management?

Retail category management refers to categorizing products or services based on shared traits or goals. Further, categories are classified based on volume, category, supplier, or value.

For instance, you might organize a store’s shelves using the category management principle: one shelf would solely include dairy products, another would contain meat products, and so on. The growth of product sales within a specific category and the profitability of those sales are the primary markers of effective category management.

Top 4 Essential Retail Category Management Tips

The term “category management” was coined by Brain F. Harris in 1997 to improve the overall strategic approach in the retail industry. Here we bring you the top tips to redefine category management:

1) Assessing Your Categorization for Shopper’s Convenience:

Imagine entering a supermarket with a long list of grocery items to collect and all you can see is scattered inventory in a haywire fashion. Here is where the right inventory categorization and strategic product placement come into the picture.

Shoppers must be able to witness a clear division in product categories and should be able to choose from their preferred categories in the easiest possible way. For instance, all the dairy products take a defined rack in your supermarket, and adjoining it are the bakery products that the customers might want to add to their cart.

Another example would be to place children’s products and eatables at a lower height so they could grab these items easily.

Also Check: Supermarket Store Inventory Management

2) Categorize and Place Based on an Item’s Demand:

Another tip to smart retailing is linking your retail category management process with sales volume. It is smart to create sub-categories for your fast-selling products and differentiate them from your slow-selling products.

The smart retail software like Ari POS (What is POS?) can help you analyze your slow-selling vs fast-selling products. And you can use this information to coin important sub-categories which will thereby help you with product placement, stock replenishment schedules, etc.

3) Categorize to Reduce Overhead Costs:

Another key aspect of inventory categorization links with overhead costs. While you categorize your inventory you must be watchful of the overhead costs associated with them. These costs include storage costs, handling costs, item expiry costs, etc.

That said, it is smart to differentiate the low-overhead cost categories from the costlier ones. Here are some tips to help you manage the high overhead cost categories:

Assign smaller racks for product categories that demand high overhead costs. This way your rack will appear to be full at most times and you can avoid overstocking.

Use a smart Point-of-sale system to notify you whenever an item in the above category is low in stocks. Moreover, you can expect to be notified when some items in this rack are nearing their expiry dates. Thus, you can counter it by planning a “Sale” on these items.

Also Check: Things to Know About Retail Inventory Management Software

4) Sub-Categories and Place Based on Profit Margins:

Smart sub-categorization is yet another important key to building successful retail businesses. Category management in retail must also accommodate ‘profit margin’ as a vital differentiator.

For instance, you might be selling two similar kinds of chocolate cookies with the same composition and on the same pricing. However, these are from different brands and offer different profit margins to you. In this case, it is smarter to plan your stock volume and product placement preferences around the products that offer you a higher profit margin rather than its alternatives offering a lower profit margin.

Conclusion

Today retail category management goes way beyond the traditional category designation like gender-specific, seasonal categories, simple product type categorization, etc. Above are some of the smart category management tips that the retailers have been leveraging for higher sales and retail success.

Moreover, retail category management software has been a vital investment for most of successful retail businesses.

One such software is Ari POS which helps you in extensive ways like:

• Categorizing slow-selling and fast-selling inventory.
• Categorizing based on overhead costs associated.
• Categorizing based on changing trends.
• Categorization based on expiry schedules.
• Serial Number and SKU Generation (What is SKU?)

Much more