How can you use category management to reduce waste and improve inventory?

1 Understand your customers

The first step in category management is to understand who your customers are, what they want, and how they shop. You can use various sources of data, such as sales reports, loyalty programs, surveys, and market research, to segment your customers into different groups based on their demographics, lifestyles, attitudes, and buying patterns. Then, you can identify the most profitable and loyal segments and tailor your product offerings and marketing strategies to meet their needs and expectations.

2 Analyze your categories

The next step in category management is to analyze your product categories and evaluate their performance, potential, and role in your store. You can use metrics such as sales, margin, turnover, market share, and customer satisfaction to rank your categories according to their contribution to your overall business objectives. Then, you can classify your categories into four types: destination, routine, seasonal, and convenience. Each type requires a different level of investment, space allocation, and promotion.

3 Optimize your assortment

The third step in category management is to optimize your product assortment within each category. You can use tools such as planograms, shelf space analysis, and assortment optimization models to determine the optimal number, variety, and depth of products to offer in each category. The goal is to balance the trade-off between satisfying customer demand and minimizing inventory costs and waste. You can also use category insights and trends to identify new opportunities, gaps, and innovations in your assortment.

4 Set your pricing

The fourth step in category management is to set your pricing strategy for each category and product. You can use methods such as price elasticity analysis, competitive benchmarking, and value-based pricing to determine the optimal price points and price ranges that maximize your profit and customer value. You can also use pricing tactics such as discounts, bundling, and dynamic pricing to stimulate demand, increase sales volume, and clear excess inventory.