How Category Reviews Have to Change

By Sue Nicholls

I had a planned topic for this article that was going to focus on something completely different but changed it last week because of a recent experience I had with a retail client that is very relevant for sharing. 

Let’s say you’re looking at your category or brand results versus 2020 and you’re looking at your percentage change versus year ago numbers. In some categories, the numbers may see double-digit growth, while others are showing double-digit declines or worse. The sales results from 2020 (particularly in the March to June period) include results from a very volatile period; a lot of shifting was driven by pantry loading and subsequent supply chain issues. In 2021, some shoppers have stuck with new things that they tried, while others have gone back to their old favorites, while others are somewhere in the middle. It’s imperative that retailers and suppliers look at their business through the proper lens – and this means NOT the same way you did pre-pandemic.

I was recently (August 2021) working with a Canadian grocery retailer client of mine in some training and they shared a supplier’s presentation on a snacking category. It showed how the category was up 18 per cent versus year ago (data to March 2021) based on syndicated point of sale (POS) data and showed comparisons by brand (with focus on their >60 brand share) behind this double-digit growth number. The presentation had several major flaws including:

  1. No reference to a pandemic last year that drove these unprecedented numbers and where the category is anticipated to go.
  2. Category results broken out only by brand – no size, segments – just brand. A proper category review includes subcategory results based on the most important breakouts to the shopper (which is typically NOT by brand).
  3. The key measure that was focused on was $ % change versus year ago. By category and brand. Think about it – there were little to no promotions or price reductions in 2020 – so if everything is selling at regular price, dollar sales will be up.
  4. Promotional analysis including TPR (temporary price reduction) results in 2020. How much promotion happened during the pandemic?
  5. Not a word about the shopper – they drive everything!
  6. Recommendations to change assortment and shelf based on these business results. You should NOT be making tactical changes to your category using 2020 business comparison results!

Category reviews need to be revamped and improved to reflect a completely new shopper, a new omni-channel approach, and include recommendations that focus on the shopper and increasing their satisfaction. Following are three tips to improve category reviews to better reflect today’s world:

TIP NO.1:  IMPROVE YOUR POS ANALYSIS!

Think about additional POS analysis that may help you to better understand your numbers, such as how you compare to competitors and total market, and ways to dig in deeper to your data for more insights. Here are some suggestions for improved analysis:

  1. Look at share point change (retailer market share or brand category share)
  2. Compare Category Development Index (CDI) change across related categories
  3. Compare dollars to units and tonnage (prices may be driving up $ sales)
  4. Compare to 2019 (instead of 2020)
  5. Look at weekly trend data for latest two or three years
  6. Compare results to other similar categories to compare growth results
  7. Dig deeper into geographies (regions/channels), time periods (Latest 4W, Latest 12W, Latest 24W) and products (use the category decision tree hierarchies for subcategory breakouts to include)

TIP NO.2:  INCLUDE AN OMNI-CHANNEL MARKET PERSPECTIVE

Given the huge growth of online sales for delivery or for pick-up (“click and collect”), you should include an overall view of what’s happening across all available retail channels – even if it’s from different data sources. Capturing the total market in today’s world requires a view of Online and Offline retailers (including pureplay eCommerce, Omni-Channel retailers, and Brick & Mortar retailers).

This reminds me of when Walmart came to Canada but initially wasn’t being captured in the syndicated “total market” data. At the time Grocery retailers were measuring their market share based on “Total Grocery” and even when “Total Mass” data became available, many Grocery retailers stuck with measuring their share of the Grocery market. Same thing here. If you don’t keep your eye on the total market, then competition can sneak up and surprise you.

For a total market perspective, your best bet is probably panel data because much of the panel data has expanded to include all channels. It’s important to realize the complexity of the analytics that result from the disparate data sources that span across the omni-channel.  And therein lies a dilemma for organizations; not only which data sources to purchase, but how to integrate them together for quicker access to the data to draw great insights.

TIP NO.3: INCLUDE A SHOPPER PERSPECTIVE

Lastly (and most importantly!), add shopper data to your review including purchase behavior, leakage data, demographic data, shopper insights data, loyalty card data, and shopper trend data. This will give a better perspective on what is happening in the category from a shopper lens, including how the shopper has changed (and continues to change) and anticipation for where it’s going in the future.

Shopper data has become a much more robust and more frequently updated data source than in the past, giving the invaluable shopper perspective that needs to be the focus and star of category reviews. While our $ sales and % change and market share metrics show the business side, the shopper data shows us who is driving the results through what shopper behaviors and even why (or why not).

A good category review needs to highlight how the shopper has changed (and continues to change) since the pandemic started – including their shopper behavior in measures like penetration and $/buyer, checking for shifts in shopper demographics – which are happening from the pandemic, analyzing conversion rates, understanding heavy and light buyers, and checking for new competitors.

The opportunity?

UPDATE YOUR APPROACH TO CATEGORY REVIEWS!

Deeper (within your POS syndicated data); broader (for a total market perspective to include online and offline); and shopper focused. Improve the analytics so they are relevant and compelling (not brand focused) for your retailers and their shoppers with actionable recommendations that will better satisfy shoppers and drive category and brand results.

Win-Win-Win!

What needs to change?

Retailers should better articulate what they need from their supplier partners who are coming in armed with “category” reviews (measures, data sources). They should also train their team to understand the data, build critical thinking skills, ask the right questions and give them the tools to help them make the best decisions for their categories.

Suppliers should create new category reviews to reflect the new “Total Market” with a focus on the changing shopper with a look to the future. An old and stale category review that only includes historical POS data is not enough in today’s world.

Winning retailers and suppliers need to keep a pulse on the changing shopper and market to make the best decisions and recommendations, and ultimately create the best solutions for their shoppers.

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