Independents Report: The challenge of small scale

An independent grocer can find getting up to speed with an effective category management program to be a monumental job. But it's a must-do for those who need optimum sales and profits.

According to Doug Stone, advertising and marketing director at W. Lee Flowers and Co., Inc., a regional wholesaler based in Lake City, S.C., developing category management programs for independents presents many challenges, but overall it's a practice that can produce greater value for consumers, and one that offers significant financial benefit to storeowners.

"From a wholesaler perspective, one of the greatest challenges of category management is not to treat independents as cookie-cutter operations," Stone says. "At W. Lee Flowers, we service over 100 retailers in three states and we've got the situation where every store is different from the one in the next town over. Our job is to constantly monitor product assortment and to make sure we're offering to customers in each market the items that they want. Obviously that's no easy task."

Hard road to success

Other challenges in providing category management to independents include technology, store shelving, DSD programs, and the degree of commitment from storeowners themselves. "While 90 percent of our retail customers operate on the same technology platform, capturing data from those using other systems is definitely more time-consuming and difficult," Stone says. "Plus, in working with independents, we've found that many different types of grocery shelving and gondolas exist. The size and configuration of shelving determine product variety and inventory levels. While they differ greatly in independently owned stores, store sets and shelving in chain stores are often identical. That makes category management for chains much simpler."

He continues: "While most chains operate from an approved and limited DSD vendor list, independents typically deal with more vendors. Because the DSD component is so large, for example in beer and wine and snacks, independents must rely on their DSD vendors—some of whom are more sophisticated than others in their approach to category management—to develop store-specific programs."

He advises: "To be successful at category management, which is consumer-driven and improvement-oriented, every item, whether it comes from the wholesaler or an outside vendor, must stand on its own. Storeowners and managers must believe in the numbers and commit to maximizing movement and profit by analyzing categories such as laundry, paper products, or beverages as a whole—not by brand or by allotting x number of linear feet per manufacturer. In essence, category management involves managing product categories as business units on a store-by-store basis to satisfy customer needs."

What factors at the point of sale influence a customer's purchasing decisions? According to Stone, there are many. "Size, packaging, shelf positioning, brand recognition, and product benefits all affect velocity. That's why consumer research is an important component of category management. It's often structured to test and compare shopping behaviors as they relate to all of these attributes."

Manufacturers matter

Before he joined W. Lee Flowers in 1994, Stone was the manager of food industry competitiveness for the government of Ontario, Canada and worked for the South Carolina Department of Commerce in economic development. He says manufacturers play a major role in the success of his company's category management program. "We're fortunate to have a great relationship with the manufacturers and vendors who work with us," he says. "They help us to identify why we as a wholesaler are—or are not—selling specific items, plus they're instrumental in providing consumer research and analyzing IRI data to determine what's moving in our retail units vs. the competition."

While competitive pressures in variety and pricing are forcing W. Lee Flowers to remain more focused on the center store, the company has been practicing category management in perishables on a limited basis. "We feel there are tremendous opportunities in perishables, especially in the meat department," Stone says. "During the past five years, more and more convenience items have been introduced in meat, and there's a lot of pressure to get new products in the stores. Because shelf space in most stores has not increased and product assortment has, we must constantly rationalize SKUs to optimize sales and profits."

Stone feels genuine enthusiasm for category management. "It's definitely a numbers thing, and the concept fascinates me," he says. "It's exciting to think about all those hidden little gems of information out there which can help our independents to be more efficient. As a wholesaler we must work with manufacturers and retailers to study the numbers, uncover the findings, and determine how best to capitalize on the opportunities. That's how we can stay ahead of the game."

Independent Retailing editor Jane Olszeski Tortola can be reached at [email protected].
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