Intro
Digitisation is the term that has become the battle cry of modern entrepreneurship. It is stylized as an indispensable and indispensable basis for the continued existence of every company and thus of all internal divisions.
One likes to link digitalization with IT processes, agility or change management processes.
But what does it mean for the heart of a retail company, Category Management (CM)?
Isn’t CM already the most digitalized area in most companies? After all, everyone already digitally captures their product data, determines assortments and marketing opportunities according to customer needs and keeps an eye on life cycles, profitability or reach.
Sure, but digitalization has a big foot in the door; since every company has a different stand, every company and therefore its departments have their own individual needs in terms of the degree of digitalization.
The example company:
BLet’s stay with the CM example and concretize it in an example company.
The company is called “Costume Jewellery Gold Dust”, it was founded 25 years ago in a small room in the pedestrian zone of the old town of Kleinhausen. In a very short time it has conquered the regional market for costume jewellery, as it was able to expand its USP quickly and prominently. This is based on a broad and fast changing assortment at reasonable prices.
To this day, the suppliers are brands that use the company as a B2C distribution channel.
When it created its own brand 15 years ago via a direct line to production facilities in Italy, it quickly realised that expanding its target group through supra-regional sales was a sensible step towards growth. So in the following 5 years it opened branches at 10 more locations.
5 years ago, it launched its own online shop, which today is considered more of a figurehead than a sales channel.
In the last three years, however, growth has flattened out alarmingly, which can be attributed to an extreme increase in competition.
The company’s competitors are other retailers, who also entered the market with the same idea, but also the brand suppliers, who are increasingly building up their own B2C business. In addition, the company is facing a confusingly large competition from e-commerce.
All these competitors increase the pressure on the market price and undermine the USP of the company “costume jewelry gold dust”.
The results of this competition are, among other things, that the warehouses are turning more and more slowly, the data acquisition is less and less able to provide the correct assortment forecasts and, as a consequence, their category managers and purchasing managers have to plan with ever greater risk.
The management recognizes the problem, but is always caught up in the day-to-day business. They realize that they lack the distance to determine and implement the necessary changes. Management decides to seek support and advice from the Sophus Group.
The as-is analysis
After taking over the order, we as employees of the Sophus Group start with an on-site meeting with the management of “Costume Jewelry Gold Dust”.
First of all, we ask ourselves the question, where does “Costume Jewelry Gold Dust” currently stand when it is digitized in CM?
To answer this question we have to ask questions that will cause pain and the answering of which will mean a lot of work and the abandonment of emotional ties, as well as a look into “darker corners”.
– Which system landscape does “Costume Jewellery Gold Dust” work with?
– Which outputs from this system landscape can CM process at all?
– What influence does CM have on sales channels and marketing strategies?
– What conclusions does CM draw from the generated outputs and how are these currently implemented operationally?
The as-is analysis shows some potential for optimization. What is the concrete approach?
The management is in disagreement – every project participant has his own ideas. They all want to get started right away. This is normal.
However, we recommend a hypothesis-driven, coordinated approach and can come to an agreement with our client.
We want to find the best way together with “Costume Jewellery Gold Dust”, while acting in a structured and value-free manner.
Hypothesising
For this reason, all suggestions are first collected in a brainstorming session, each topic is taken up without value and clearly visible in a Kanban Board.
Hypothesis validation
All those involved are very much interested in “costume jewelry gold dust”, so they have highly motivated to form countless hypotheses. Of course, there is a lack of time and means to put all hypotheses into practice, moreover, some of them are very cannibalizing. We therefore recommend focusing and prioritizing.
This will again be a hard job, because here, too, it is necessary to proceed in a value-free and argumentative manner. Important here: we agree on time slots and other rules for speaking and challenge time so that the discussion does not get too lost in individual topics.
Validation of the Winner Hypotheses
Three winning hypotheses have emerged. We recommend that the client first validate these hypotheses on a small scale, before all resources are focused on them:
- further distribution channels; “costume jewellery gold dust” needs more reach. To generate this, it would like to expand its sales via national and international marketplaces. For this purpose, 3 marketplaces will be selected and in a manual integration form first selected goods will be placed in order to test the sales potential. Only when this step has been successful is it worthwhile for CM to expand the system landscapes, which would make it possible to transfer product data automatically and measure the success.
- product range streamlining; in the long run, the product range is too diverse. CM requires valid market data on consumer behavior, trends, product life cycles, and competitive dispersion in order to reduce existing stocks and to be able to measure future assortment demands in time. For this purpose, some of the stores are declared test stores in which the storage and turnover times of products are recorded precisely on a daily basis and forwarded to the head office, but in which new products can also be offered on a test basis and their sales potential evaluated.
- New USP; After the price pressure on the market and the desire for product range streamlining made the previous USP obsolete, the cooperation with a video blogger is to be tested, which has international recognition and is willing to exclusively wear and promote products of “Costume Jewellery Gold Dust” in the future. For validation purposes, a YouTube survey will be launched to measure the quality of the match between fashion brand and advertising icon from the customer’s point of view.
Structure and anchoring
We accompany project groups of the “Fashion Jewellery Gold Dust” during their phase of hypothesis validation, with regular meetings and help to monitor progress.
In a final decision meeting the project teams present the corresponding results of the validation phase. The results show that the hypotheses are valid with a few adjustments.
The management is satisfied with the results.
Next, we support the company in planning the concrete implementation of the winning hypotheses.
Project plans are written, cost frameworks are determined. investors and stakeholders are involved.
Finally, everyone is now ready to invest in the digitalisation of the CM.
Then the management takes over alone, it now takes care of the implementation of the necessary tools, the new requirements for their interface and project management, the integration of new workflows and control mechanisms and most importantly: all participants work together on the necessary mindset.
The word at the end
The digitization of a company or a business unit such as CM is not a temporary IT implementation project, but a permanent and necessary companion in contemporary development.
It involves much more than tools, system landscapes and interfaces.
If one takes it seriously, it requires a constant questioning of one’s own actions, hierarchical structures and internal processes.
Only through movement can standstill be avoided, which is, as is well known, death.
Digitalization helps everyone not only to keep up with the ever faster growing demands of a market, but at best to help shape them.
The involvement of third parties, such as the Sophus Group, who contribute know-how and have the appropriate distance, is highly recommended. This reduces the risk of bad investments.