Shopper Centric Category Management in Convenience Stores: a Qualitative Study

Abstract

The literature shows that category management is an important concept and tool for retailers and suppliers, but that there is a trend to move to a more shopper-centric category management approach, linked to the shopper-marketing approach. However, the knowledge on this issue is scarce on some retailing sectors, like convenience stores. The present study is focused on convenience stores, with the main purpose of finding out to what extent non-major food retailers successfully adopt a shopper-centric category management. The study is relevant in order to evaluate if a more shopper-centric approach is adequate to smaller companies/stores. To accomplish that goal, an exploratory qualitative study was conducted among convenience store retailers and suppliers. Six semi-structured face-to-face interviews were conducted with Commercial Directors and Trade Marketing Managers. This data was complemented with thirteen interviews with shopper marketing experts. The data was analyzed using thematic content analysis technique, identifying themes, categories, subcategories, units of meaning and relations. The results revealed that convenience store retailers use some of the principles and techniques of the shopper-marketing and shopper-centric category management approaches, which they do in a non-standardized and non-formal approach or process. Their suppliers (the manufacturers) do it in a more formal and structured manner, probably as a result of previous interaction with major supermarkets chains. Both direct and indirect evidences of a shopper-centric approach were found, which, however, were slight, discrete and not formal.

Keywords: Category managementShopperPoint-of-purchaseShopper marketingRetailing

Introduction

Category management (CM) is a concept that can fit into the retailing mix and it started in the early 90s, when retailers bought products by suppliers instead of by product category (Weber et al., 2015). CM has gained global acceptance since then (Guissoni, Consoli & Rodrigues, 2013; Harris, 2010; Dewsnap & Hart, 2004). Its origin is intrinsically linked to a business environment characterized by intense competition, new retail formats, consolidation and maturity of the Fast Moving Consumer Goods sector (FMCG), proliferation of new products beyond shelf space available, increasing demand, volatility of consumers/shoppers, and retailers/suppliers consciousness that both would have more to gain through cooperation (Benoun & Héliès-Hassid, 2004; Gooner, 2001; Karolefski & Heller, 2005).

After more than two decades of its origin, CM still is important, but there is a need of a more shopper-centric approach. However, few studies were conducted to analyse if a more shopper-centric is CM being implemented in the marketplace, especially in stores besides large supermarkets.

Theoretical Background

Concept of category management

Gruen and Shah (2000, p. 484) define a category as "a distinct and manageable group of products that customers perceive as being related and/or substitutable in meeting their needs". Thus, a product category is a set of products or services that consumers perceive as being complementary or substitutes in what regards the satisfaction of certain consuming needs (Alvarez, 2008; Kurtulus & Toktay, 2011). This group of products might be managed by the retailer and/or supplier with a set of formal structured phases, known as CM process (Gruen & Shah, 2000; ECR Europe 2000; Karolefski & Heller, 2005).

The retailing business landscape in the 90s called for an approach that would allow retailers to market products that consumers effectively valued and, simultaneously, that would allow differentiation from competitors (Karolefski & Heller, 2005). This fact led to the creation of the concept and process of CM (Ferreira, 2001), which grew and was applied with benefits beyond FMCG (Dewsnap & Hart, 2004). In the literature there are several definitions of CM (Gooner, 2001; Dussart, 1998), as presented below in Table 1 .

Table 1 -
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From the definitions presented, it can be concluded that CM goes beyond managing products as operating business units. CM also deals with the discovery of the needs of consumers and, consequently, with the ability to meet them better than the competition (Karolefski & Heller, 2005).

It is important to differentiate and relate CM with Efficient Consumer Response (ECR). ECR is an approach directed to the relationship between retailers and suppliers, framed within the optimization methodologies of demand flows and supply chain (Ferreira, 2001). The ECR foundation is that all stakeholders in a retail value-chain should be understood as a single entity, working together to maximize chain efficiency and add value to the end customer (Reyes & Bhutta, 2005). The ECR philosophy comprises four main areas (Corsten & Kumar, 2005): demand management, supply management; enablers (e.g. standards of electronic messages); and interfaces or integrating elements (e.g. collaborative planning and forecasting). CM is one of ECR operational facets within the demand management area (Benoun & Héliès-Hassid, 2004; Hutchins, 1997; Johnson, 1999;; Pearce, 1996).

Another concept related to CM and ECR is trade marketing. Alvarez (2008) mentions that there is no clear consensus on the content and functions of trade marketing. Nevertheless, Alvarez (2008, p.46) defines it as "both an organizational unit of producers and/or a philosophy that fulfils the mission of structuring their marketing strategy for each channel and distributor/retailer. In the perspective of the retailer, trade marketing seeks to increase business volume through a better satisfaction of the consumer and also through strategic and operational alliances with the manufacturers". Thus, trade marketing aims to improve the relationship between suppliers and retailers, as well as it might also be a new unit in the structure of companies and seeks to improve the coordination of marketing and sales departments (Cespedes, 1993; Dupuis & Tissier-Desbordes, 1996).

As summarized in Table 2 , common ideas, similarities and differences can be found between the three above discussed concepts.

Table 2 -
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CM involves a structured process, and the most commonly used was proposed in the early 90s by The Partnering Group (Gruen & Shah, 2000; ECR Europe 2000; Karolefski & Heller, 2005). Although it should be a circular and long-term process, there is a sequence of phases associated with it (ECR Europe 2000; Karolefski & Heller, 2005; Alvarez, 2008; ECR Portugal 2001):

1. Definition of the category (category of products, subcategories, segments and subsegments)

2. Assigning a role to category (e.g. target, preference, convenience, seasonal)

3. Conducting a category diagnostic or assessment

4. Establishment of the category performance indicators/scorecard

5. Creation of the marketing strategy for the category (e.g. traffic builder, transaction generator, transferring profit, generating cash flow, creator of enthusiasm, image creator, position-defender)

6. Choosing the tactics for the category (assortment and brands to market, space management and display, point of purchase advertising, merchandising, prices and promotions)

7. Implementation of the plan

8. Reviewing the process and category performance.

Relevance of category management

Dewsnap and Hart (2004) conducted a literature review of CM and concluded that it is a process that provides a platform to achieve sustainable competitive advantage, based on the ability to sell the right products to meet the rapidly changing consumer needs in highly complex markets. In fact, Karolefski and Heller (2005) defend that CM is increasingly important, because there are several retailing chains that serve a very volatile, diverse and demanding base of shoppers. This means that CM is important, for managers and academic research (Johnson & Pinnington, 1998).

Although the effectiveness of CM depends on the product category (Dhar, Hoch & Kumar, 2001), the relevance of CM can be demonstrated by its benefits. Generically, CM helps to maximize in-store marketing return on investment, increases sales and profits (Zenor, 1994; Kahler & Lingenfelder, 2006), and represents efficiency gains to the retailer and supplier (Bandyopadhyay et al., 2009; Hoch & Pomerantz, 2002). In more detail, other potential benefits of CM are (Weber et al., 2015; Karolefski & Heller, 2005; Guissoni, Consoli & Rodrigues, 2013;Gajanan et al., 2007; Nielsen, 1993; Harris, Swatman & Kurnia, 1999; Ferreira, 2001):

  • Inspires and encourages improvements in joint planning between retailer and suppliers;

  • Increases the understanding of consumers and leads to a management more focused on their needs and less on the characteristics of the products or their suppliers. This potentiates increases in customer satisfaction, through adequate product range, appropriate prices and ease of purchasing (through improved store layout);

  • Encourages fact-based decisions, increasing the quality of important decisions related to in-store marketing (since it uses consumer preferences and needs as inputs) and allows faster reactions to the market;

  • Allows holistic and consistent business decisions, such as the identification of uninsulated opportunities, increasing supply-chain efficiencies;

  • Induces increases in sales and profitability of the categories, as well as improvements in operational efficiency;

  • Induces higher return on promotional activities, through a more efficient schedule and adaptation to the reality of the store and consumer (e.g. optimizes the product range sold by each store);

  • Creates a framework for retailers to measure the return on investments and evaluate new items and category performance;

  • Provides the basis for application of new technologies.

Shopper-centric category management

In the CM approach, the understanding of the consumer will be increasingly crucial (Harris, 2010; ECR Europe, 2011; Mitchell, 2001). In fact, Desrochers and Nelson (2006) report that CM still has considerable untapped potential, suggesting that progress can come from analysis of data related to the consumer/shopper in conjunction with secondary data of the store (e.g. transactions and sales). This position is related to the growing importance of the customer experience in retailing (Grewal, Levy, & Kumar, 2009). In addition, Weber et al. (2015) mention that no major changes or upgrades occurred since the original CM process definite. Those authors found the following drivers of the need for a more shopper-centric retailing approach:

  • the emergence and growth of new “food lifestyles“ (e.g. gluten free, organic), pointing-out to inter-category shopper solutions;

  • the vast amount of quality shopper data available (e.g. big data digital-based insights) with the power to unlock the “why” behind the shopper and consumer behaviour;

  • the channel migration, moving to a bigger variety of retail outlets (besides supermarkets and department stores

Due to those trends, the CM process presented before, and its phases, have been refined and increasingly focused on the shopper, besides the end consumer (Karolefski & Heller, 2005). This evolution is related to the emergence of the shopper marketing approach, which is defined as the planning and execution of all marketing activities that influence a shopper along, and beyond, the entire path-to-purchase, from the point at which the motivation to shop first emerges through to purchase, consumption, repurchase, and recommendation (Shankar et al., 2011).

As mentioned before, the need for this more shopper centric CM was felt because, in practice, the implementation of the steps proposed in the original version of the CM process proved to be more focused on what the data/numbers revealed on products than on individuals (Karolefski & Heller, 2005).

Gruen (2002) and Weber et al. (2015) state that the next challenges for managing categories should be to build in the existing foundation, namely:

  • more emphasis on the shopper, with thorough understanding of the shopper prior to any plan development (a 360º view, in all phases of the entire path to purchase), because shopper insights are not being used as an essential first step in the traditional CM process;

  • a shift in focus, from category efficiency to shopper experience;

  • expanding the process beyond the individual categories to multiple categories designed to provide integrated solutions to the shopper. Also meaning that the planning and execution should stretch beyond categories into the store and floor/aisle;

  • coordination of different suppliers in different categories;

  • streamlining the processes, to make them less demanding in inputs and more focused on activities directed to the market;

  • making CM a central process, instead of projects;

  • exploring more effectively the full potential of internet, digital technologies and mobile devices;

  • retailer/supplier collaboration on intelligence-sharing, besides general joint planning.

Thus, it can be said that CM tends to evolve to become more effectively shopper-centric. According to Karolefski and Heller (2005), this shopper-centric CM process might follow a sequence of phases build upon the traditional CM process:

1. Definition of the category, based on the in-depth understanding of the target market needs (both of shoppers and consumers, along all the path-to-purchase) and on how the category is intended to fit into the retailer (link to retailer mission, competitive strategy and positioning). Categories should be defined based on the shopper, instead of on the product groups the retailer buys (e.g. from “breakfast cereals” to “all products constituting breakfast”)

2. Understanding the shopper decision tree and analysing how the shopper behaves towards the category, considering the entire path-to-purchase (pre-store, in-store, after-store) and its links to consuming and end-users

3. Segmentation of shoppers and stores

4. Completion of category diagnostic

5. Creation of the marketing strategy for the items/category

6. Assigning a role to the category

7. Choosing the tactics for the category

8. Establishment of category performance indicators and respective goals

9. Implementation of the plan

10. Review of the category performance

Therefore, in this updated version of CM, the emphasis is placed on the shopper and consumer, and also recognizes that many shoppers tend to make their purchases according to shopping missions instead of individual products or brands (Hutchins, 1997). According to Kunz (2005) and to the In-Store Marketing Institute (2009), this focus on the shopper is the main aspect that the future of CM should focus on, which is extended to the management of the entire value-chain (Jones & Clarke, 2002). To this end, the same author emphasizes the importance of determining what consumers and shoppers intend and of understanding the shopping process and shopper activities. Therefore, it is important to understand how shoppers perceive the process of shopping and consumption (Johnson, 1999). Therefore, studies should be carried-out to understand important aspects of the purchase, such as the motivations (e.g. for immediate consumption, supply, later consumption by another individual, etc.), habits, uses and attitudes. To illustrate how complex this might be, Lucas (2010) points out that, on the same day, the shopper can play different roles for different categories (e.g. "nutrition expert", "concerned citizen", "purchase commissioned", "specialist opportunities").

Problem Statement and Research Question

Based on the previous sections, it can be deduced that CM still is important, but there is a theoretical and managerial recognition for the need of a more shopper-centric CM.

However, few empirical studies that evaluate to what extent is a more shopper-centric CM being implemented in the marketplace were found. The studies found (e.g. Weber et al., 2015) analyse the perspective and practices of large supermarket chains on consumer packaged goods. No studies were found addressing other types of retail stores or sectors.

Based on the literature review, on research directions identified in previous studies (e.g. Johnson & Pinnington, 1998) and recognizing that CM brings benefits to other types of retail stores other than the large supermarket chains, the main research question addressed in the present study was: “To what extent do retailers, other than major food retailers/supermarkets, adopt a shopper-centric CM?”

Research Methods

To address the research question, an empirical exploratory qualitative study was conducted among retail marketing managers and their merchandise suppliers. The study was focused on the convenience stores sector in Portugal, since previous interviews with thirteen shopper marketing experts indicated that convenience stores could be a type of store that might greatly benefit from the shopper marketing approach (besides large supermarkets food retailers).

The convenience stores sector in Portugal has specificities that make it a particular case-study. In this market, the large majority of convenience stores are located only on gas/service stations; the core product is the gas (and not the products sold inside the store); it is a highly concentrated and competitive market with only four significate retail brands: BP, Cepsa, Galp (leader) or Repsol.

The interviews were conducted with the support of a semi-structured questionnaire, a method appropriate to exploratory qualitative studies (Carson et al., 2004; Malhotra, 2007; Aaker, Kumar & Day, 2003; Kinnear & Taylor, 1996).

These interviews were conducted individually, face-to-face, with the Commercial Director of each retailer and with the Trade Marketing Manager of each supplier. The sample of suppliers was composed by the suppliers/brands with best practices according to the interviewed retailers. Three retailers were studied (among the four retailers of the universe) and three interviews were conducted with the suppliers, corresponding to at least nine brands. The data from these interviews was complemented with interviews with thirteen shopper marketing experts.

The data gathered was analysed using thematic content analysis, given the suitability of this technique for exploratory analysis of unstructured data (Mayring, 2000; Hsieh & Shannon, 2005; Harwood & Garry, 2003). To this end, a thematic categorization was made, sorting the data according to its semantic similarities, following the structure proposed by Graneheim and Lundman (2004): identification of themes, categories, subcategories, units of meaning and relations.

Findings

The first major theme that emerged in the interviews with retailers was designated as “characterization of the convenience store business” (Table 3 ). The interviews revealed the particularities of this sector, namely the fact that the convenience stores are integrated in gas/service stations but, in the past, convenience stores existed as stand-alone stores in urban areas/streets. This last model of commerce was not totally successful, which was attributed to the perceptions and attitudes of the Portuguese shopper towards retailing:

“The US is a different market than ours. In the US it is a store that also sells fuel"

“Here the people first go to supermarkets and hypermarkets, then go to the grocery stores, and only in the end go to convenience stores (...) because they are perceived as being expensive”

“It is a different market from US, UK or Spain (…) It is the cultural- mental software”

The interviews also indicated that the convenience stores operate under a CoCo model (company owned and company operated), CoDo (company owned and dealer operated), DoDo (dealer owned and dealer operated) or CoFo (company owned and franchised operated). Regardless of the operating model, there is a central management and it adopts a store clustering (depending on the location and store area), which has implications on the merchandise layout and roles attributed to each category.

Table 3 -
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The second theme found was labelled “traditional category management”. In this theme, we found two major evidences: that a CM approach is used by convenience stores and that it is based on the traditional CM approach.

Although there were not found references to the formal phases of the traditional CM process, some evidences led to the conclusion that a CM approach is indeed being followed. As presented in table 4 , those evidences are the terms used in the current management vocabulary (e.g. the term “category” is often mentioned), the grouping of products and the assignment of roles to each product group. Transcriptions of the interviews that illustrate such findings are:

“We use shelf planograms (...) established according to what each product family represents in sales and on the market itself"

"very fast decision, almost immediate and with a more emotional character" | "There is more a desire than a necessity" (impulse role)

"The purchase is mostly suggested after entering the shop" | "awareness of a need rather than a desire (...) maximized through the exposure to such category" (suggestion role)

"planned ahead" | "might not be the main reason for visiting the store (...) but it is also a motive" (destination role)

"It is a purchase planned in advance and it is urgent or of immediate stress relief" (emergency role)

Table 4 -
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Another theme found was named “traces of shopper-centric category management”, which includes some evidences that the management of product groups in convenience stores is moving towards a focus on the shopper.

The interviews revealed some indirect and direct evidences of the movement towards a shopper-centric approach, presented in table 5 . The indirect evidences are the market research studies and analysis done to understand the shopper and the consequent decisions on the store layout and attribution roles to each category. Each category role is being defined based on the shopping missions detected by the convenience store retailer, which is a clear trace of the shopper marketing concept adoption. The shopping missions mentioned are consistent among the retailers interviewed, which means that the concept of shopping mission is being consistently applied. This shows that there is a movement towards a shopper-centric approach in the whole industry and it is not a particular case of a few retailers.

Selected transcriptions from the interviews to demonstrate these findings are:

"Each company will have its layout, this is ours (...) depends on the strategy of each company"

“(…) different missions to enter these stores: just to pay for the gas; pay the gas and buy something else; buy some products without fuelling”

“display, advertising and layout are planned considering the role of the product family”

"We have some hot areas (...) it is common to all stores of this type: the shopper enters and walks the path to the counter, which is an area of excellence (...) and the soft drinks zone”

"We also have to heat some areas (...) like the counter/payment point”

Table 5 -
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Besides the indirect and direct cues already mentioned, no other traces of a shopper centric approach were found.

Conclusions

The literature review indicated that major food retailers and suppliers already report the need for transformation of the traditional process of CM, towards a focus on the shopper. The present study aimed to determine if less studied retailing players, like convenience stores, adopt a shopper marketing approach and the respective shopper-centric category management process.

The study found out that convenience store retailers use some of the principles and techniques of shopper marketing and of shopper-centric CM. Although, they do it in non-formal or standardized approach or process. In fact, both direct and indirect traces of a shopper-centric approach were found. However, those traces are slight, discrete and not formal. This sensibility of the convenience stores towards a focus on the shopper might be “imported” or learned from their suppliers, since the suppliers already manage the relation with the shoppers in a more sophisticated manner, due to their cooperation with major supermarkets chains.

Based on those direct and indirect cues, the results also suggest that a shopper-centric CM approach is possible and suitable to other sectors other than major food retailers/supermarkets. To do so, there are some basic and essential elements that the retailer should master, involving the prior analysis of the shopper and its path-to-purchase (shopping missions, categories definition and the attribution of category roles), to uncover motives besides behaviors.

Further studies should be conducted to validate, compare and complement the results found, since this study has limitations related to the sample analyzed. Other markets, countries and retailing stores should be researched.

Acknowledgements

Authors acknowledge the cooperation of the participants interviewed, including the retailers, suppliers and shopper marketing experts.

The authors are ALSO pleased to acknowledge financial support from Fundação para a Ciência e a Tecnologia (grant UID/ECO/04007/2013) and FEDER/COMPETE (POCI-01-0145-FEDER-007659)

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Silveira, P. D., & Marreiros, C. G. (2016). Shopper Centric Category Management in Convenience Stores: a Qualitative Study. In R. X. Thambusamy, M. Y. Minas, & Z. Bekirogullari (Eds.), Business & Economics - BE-ci 2016, vol 17. European Proceedings of Social and Behavioural Sciences (pp. 327-338). Future Academy. https://doi.org/10.15405/epsbs.2016.11.02.30