E-commerce Category Management: Challenges, Opportunities, and Best Practices
Updated: Feb 5, 2021
The e-commerce industry is enormous, and yet it functions so smoothly. The secret recipe is e-commerce category management. A particular class of experts deals with matters of concern of various categories. These e-commerce category managers are the caretakers of your business. Right from pricing to space allocation, they can manage all of it.
Let us take an example of a product in a supermarket or any e-commerce website. We need to present our product in a way that appeals to our customers. Many factors come into play while addressing customer appeal.
The pricing of products has to suit the demands of customers in the niche. As a retailer, you need to make it visually appealing too. Now the question is who takes care of these roles and responsibilities and how. Your answer is e-commerce category managers.
Who are Category Managers?
In the usual supermarket, you will have about a hundred categories of products. Furthermore, an e-commerce website will have millions of such categories.
Then these categories have many variables related to them like, pricing, inventory, space allocation, and presentation. As a result, managing each of these categories is a humongous task. For this purpose, the person you can hold responsible is a category manager.
An e-commerce category manager is responsible for increasing the ROI of products belonging to a specific category. The e-commerce category manager requires a variety of skillsets to achieve this. To illustrate a few, he/she has to be a master in sales, visual merchandising, pricing, and management.
So what does an e-commerce category manager do?
The overall goal of e-commerce category management is to increase the profit of a company. There are several aspects to achieving this goal. To enumerate, e-commerce category managers can do this,
By increasing the volume of products sold, and
By improving the speed of inventory turnover in their specific category.
The development of e-commerce category management
If you think that e-commerce category management is a new term, then you are mistaken. It is a trend that has been going on for long. Yet only now has it been revolutionized. Over the past decade, several changes have occurred in e-commerce category management. Let us look at a few:
1) Tools used
Back in 2015, everything was mostly manual. The earliest e-commerce category managers used Microsoft-excel. Previously, the sheets on excel provided a decent interface to manage the limited data available with them. The work was manual and hence tedious.
On the contrary, contemporary e-commerce category managers use Advanced BI tools like Power BI and thoughtspot. These tools are not only automated but also customizable. These tools use complex machine learning algorithms. By analyzing customer trends through advanced data analytics, you can make tough business decisions. Data-driven decision making ensures reliable solutions too.
2) Variety of data used
About 2015, business decisions were made as per the internal data only. Brainstorming sessions with the top executives worked as the decisive panels. As a result, businesses were mostly stagnant.
After about five years of rapid change in data analytics, competitive data came into the picture. You can curate this data from your business competitors. Thus, this data allowed a fool-proof trend analysis. As a result, businesses have become global.
3) Pricing trends
Back then, pricing was guess-based. Each retailer would learn about the trends through word of mouth. This process of very slow. With time it has evolved into dynamic pricing where e-commerce category managers analyze competitive data and keep altering product prices to ensure maximum sales.
4) Promotional strategies
The e-commerce industry transitioned from mere discounts to advanced promotional tactics in just about five years. Now, businesses offer various types of cuts. To illustrate, the packaging of multiple products, discounts, and alternative product recommendations are a few.
Challenges in e-commerce category management
With time, shoppers’ expectations have evolved. As a consequence, the marketplace has become more competitive. With the onset of data-driven marketing, e-commerce category management experiences a few challenges too.
1) Giving shoppers a reason to choose your store or website
Nowadays, just reasonable pricing and satisfactory product quality aren’t enough. As an e-commerce category manager, you need to focus on differentiation too. Due to the competitive nature of the e-commerce field, every marketing plan needs to revolve around it.
You must start by narrowing down your target shoppers and then their needs. Retailers should then focus on improving the appeal of the store. Also, the suppliers’ job is to make the retailer stand out from its competitors. As an e-commerce category manager, your responsibility to make ends meet.
2) Customer curation
Retailers have lately been under tremendous pressure to cut costs and maintain productivity. They even need to battle the competition from limited-range discounters. As a consequence, the present situation demands upkeep with shoppers’ demands. At this point, an e-commerce category manager comes into the picture.
To improve distribution, you need to present the uniqueness of your product. Due to this, your customers will understand the benefits of your products. Thus, you will see an overall increase in your sales.
3) Make yourself indispensable
In e-commerce category management, you have to study a large volume of data on sales dynamics and shopping behavior. Thereupon, you need to implement this into individual categories. As a result, you will get to foster valuable collaborations with retailers. In a nutshell, you get to add something positive to the marketplace this way.
4) Look at the bigger picture
As an e-commerce category manager, your job has a broader impact than you realize. A retailer aims at optimizing the whole store rather than just a category. In such a scenario, look for
Your knowledge and understanding of shopper missions will eventually help you make practical proposals.
5) Shoppers are looking for consistency and transparency
Nowadays, shoppers are technologically well-equipped. Consequently, it becomes difficult to give them a desirable experience. So before you proceed with the duties of e-commerce category management, make sure you understand your shoppers. Ensuring that your messages are clear and consistent will add to your reliability.
6) Easy implementation
This factor is one of the most overlooked factors in e-commerce category management. Most of the proposals made by a category manager are challenging to implement. On the other hand, retailers are focusing on supply chain cost-cutting. This effort is hindering their ability to perform consistently.
As an e-commerce category manager, you need to look out for these loopholes. Thus, you will be able to give more straightforward solutions that will be easy to implement.
Best practices and roles of an e-commerce category manager
An e-commerce category manager has a load of responsibilities. Therefore, comes many challenges. Hence, you need to deal with each of them using the best practices in the industry.
1) Learning about industry and consumer trends by analyzing data
By insights into customers’ behavior, you can quickly spark innovation. This information is the ultimate source of growth for brands and products. To market your products in the best way possible, you should address both quality and quantity.
Various tools and techniques can help unravel customer behavior, thus aiding the planning process. As e-commerce category managers, your focus should be on learning about purchase decision making and drivers of customer loyalty. With this in mind, you can implement the right product design, pricing, segmentation, branding, and value proposition.
2) Devising long-term Category Management Strategy for products
As category managers, you should always keep the bigger picture in mind. Generally, a strategy focuses on just a specific category. But, an effective plan reaches across categories.
Mostly, a change in a product or product range will have a considerable effect on related products. You should be able to predict these effects efficiently. Therefore, you can make plans that resonate well with other categories too. These long term plans are very decisive for the success of a business.
3) Developing exit strategies for unsuccessful products
Unsuccessful products in the inventory affect other products negatively. They usually not only take up space but also divert customer attention. So it is best to remove them.
Keeping this in mind, it is best to learn about a product’s decline among users through data analytics. The modern machine learning tools can easily make these predictions well in advance. With this in mind, it is best to scrap unsuccessful products to enhance brand performance.
4) Foster trust relationships with vendors to maintain the quality of services
An e-commerce category manager has to work with both suppliers and retailers in the background. Whereas, in the foreground, your plans are decisive for customer relations. You should keep them in the loop now and then.
In circumstances where a product is doing negatively due to either party’s fault, a good relation helps. Herein, you can take them into confidence and address the issue directly. Due to this, you save your time and also manage such problems.
5) Ensure product availability to meet consumer demands
The current data analytics tools are so accurate that they can predict the changes in product demands. By studying competitive data, you can easily list out the products and the variation in their needs.
The next task at hand is to maintain the inventory of products to suit these seasonal or festive changes in customer behaviors. For example, in winters, clothing brands bring in woolen clothes. You need to keep checking such trends.
6) Working on space allocation for products
Floor planning and space allocation is a significant task in e-commerce category management. You need to place the well-performing products right before the eyes of the customers.
Now new products should be kept where the customers get to try them out. You can maximize sales quickly by placing your products pragmatically. You have to make these decisions carefully.
7) Liaise with marketing teams to manage product category
Nowadays, product pricing is highly dynamic. Certain products’ sales surges in certain seasons. You need to work with the marketing team to make the most out of these seasons. In such seasons, you can sell your products left from previous batches.
Furthermore, you should keep in check the promotional activities that your competitors use regularly. This information will help you keep your marketing strategy on point.
8) Work closely with merchandisers to expand product categories
You can collaborate with merchandisers and have them develop their products over a broader range. As a result, your business will flourish too. For example, let us say you have collaborated with a mobile cover company. Now, if you pair one cover with each of your products, then your sales will go up mutually.
Looking at this trend, you can ask the merchandiser to expand his products to other product ranges too. Similarly, you can collaborate with buyers for promotions and give them discounts in return.
9) Make forecasts to ensure the sustainability of inventory
You need to be able to forecast trends in customer demands to ensure a fully-stacked inventory. In many instances, such times of demand can turn the tables in your favor if you have balanced your list well. This action also fosters customer trust.
10) Assume responsibility for budget development and revenue for the category
It is essential to distribute budget sustainably. You need to prioritize the areas of working your product needs. Let us say; your product has been performing well, then you need to keep its stock high.
Conversely, for a negatively performing product, you need to focus on marketing. Also, you need to spend money to learn about customer feedback and tackle them simultaneously.
Datahut specializes in competitive data. With the data we provide, you can learn tremendously about customer insights and behavior. These will subsequently help you in e-commerce category management.