E-COMMERCE
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Creating a ‘Win-Win-Win’ with New Approach
To Online Category Management
By Supriya Chaudhury
Whether you are working with online or in-store retailers, the ultimate goal of category management remains the same: Close collaboration with retailers to maximize profitability and shopper satisfaction. Creating that “win-win-win” for your brand, your retail partner, and your shopper is just as relevant and essential in e-commerce as it is in a traditional store. The opportunity for retail brands to take a new approach to online category management to deliver that big triple win is still there for the taking.
Out-of-Stocks’ Negative Impact Online
While product availability is a top priority in traditional and online stores, going out of stock online can have much more profound and long-lasting negative effects on your brand. On the physical shelf, if one product is out of stock, your brand’s product assortment can offer an instant and readily-visible alternative. Online, where products are presented catalog-style, one at a time, a brand’s full product assortment may not make it into the shopper’s line of sight. The dominoes continue to fall as out-of-stocks hurt search rank and the product could even get pulled all together from online listings. When consumers go to research your product, you miss the chance to influence a future purchase if your product is nowhere to be found in search results.
Best Practices for Product Availability
Online retailers feel the sting to their brand of out-of-stocks, too. Sentiment on social media trended negative after Amazon’s first Prime Day in 2015, primarily driven by the complaint the products offering special deals sold out too quickly. As mega online sales events like Prime Day proliferate across the globe, demand is at an all-time high for leadership and collaboration from suppliers to maintain product availability leading up to, during, and after an event to increase sales success.
Online retailers tend to carry far less product supply with little or no “back room” inventory, making out-of-stocks from even the smallest unexpected surge in demand all the more likely. Because manufacturers can track “store level” availability more readily online, your brand has the opportunity to make a play for “preferred category partner” status through proactive, daily monitoring of inventory and sales.
When products do go out of stock, take the time to establish when and why the out of stock occurred. Was it a promotion, an event, a PR program, or something else? Determining the necessary adjustments to make and - very importantly - the inventory levels to recommend to a retail partner to help capture those additional sales and satisfy customers in the future will give your brand an even bigger competitive advantage.
Category Placement Is Key
Next to product availability, the shelf planogram is at the heart of category management’s efforts in physical stores. Yet in the online environment, share of search and menu placement make all the difference to being seen or unseen. Once again, the dominoes start to fall when your brand is not at eye level on the digital shelf.
According Kantar Worldpanel, 55 percent of online shoppers use the same shopping list from one purchase to the next. If your product doesn’t come up early in the search or appear in the category menu when a shopper is assembling that first list, your brand probably won’t get a second glance. Poor online placement has ramifications for the offline world as well. Anywhere from 50 to 75 percent of in-store sales initially start with an online store search or mobile app. If your product doesn’t make the first page of search results or does appear in the right menu categories, your brand stands to lose in-store sales.
Each Online Retailer Is Unique
Just as retailers have unique merchandising formats and priorities across their traditional stores, so too do they have different approaches to search, category definitions, and menu navigation. On Amazon’s Prime Pantry, for example, shoppers can look for products in five grouped menu categories such as “Food & Beverages,” and “Household & Pets.” All have sub-categories with a mix of dayparts such as “breakfast,” and needs such as “snacks” and “cooking and baking.” Meanwhile on Peapod, shoppers can “browse aisles” by selecting from menu categories more akin to what they expect to see in a traditional store - “beverages,” “produce,” etc.
Yet all online retailers still have one thing in common: A strong desire for support from manufacturers to make sure shoppers can find the brands and products they are looking for to add to their list or cart as quickly and seamlessly as possible. Whether they do a key word search or navigate the menu, the more times a consumer has to spend sorting through results and categories looking for their desired product, the more likely they are to abandon that trip and go to another site to shop.
Going retailer by retailer to determine your share of search and how your brand’s products rank on key terms will provide guidance for improving descriptions and tags to land your brand’s products on the first page of search results.
Also, make sure your products are listed in the menu categories and sub-categories that provide the right context. A silver polish wipe in the baby wipes category on Amazon Pantry, for instance, is not the ideal placement. For the manufacturer, it makes it harder for shoppers to purchase the product; for the retailer, it frustrates and confuses shoppers to see entirely non-relevant items. Close analysis of search and menu placement also provides insight into your competitor’s category offerings and opportunities you could bring to a retail partner to fill gaps with additions to your product assortment to drive more sales and satisfy more consumer needs in the category.
Laggards Will Be Losers
With online driving an increasing share of retail sector growth through direct conversions and influence on offline sales, the message for brands is pretty clear: Winning the category now means winning online. In the words of Stéphane Roger, global shopper and retail director at Kantar Worldpanel, “The market is remarkably unkind to latecomers.” Hitting the ground running with exceptional online category management to create the win-win-win for your brand, retail partners, and consumers is the best way for your brand to pull ahead in the e-commerce race.
Supriya Chaudhury is CMO of Clavis Insight. For more information, visit www.clavisinsight.com.
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