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Many retailers outsource retail category management to a chosen category captain. This makes things easier for the retailer, but long term, who really benefits?
Recently, a new trend has emerged in the sphere of category management. Retailers have started to outsource retail category management to a chosen category captain: a supplier on whom they rely for strategic recommendations and insights. The increasing number of product categories offered by retailers and the scarcity of the resource-intensive nature of category management have given rise to this new trend.
For retailers, the short term benefits of such arrangements can be great: much better category performance 'on the cheap', because most of the work has been done by a supplier. But the long term costs could be even greater. Retailers who become too dependent on their category captains risk a strategic loss of power.
In a typical category captain arrangement, the retailer shares all relevant information such as sales data, pricing, turnover, and shelf placement of the brands with the category captain. The category captain, in return, analyses category dynamics and trends and provides the retailer with a detailed plan including recommendations as to which brands to stock, where to locate each brand on the shelf, how to display them, how much space to allocate to each brand, which new brands to include and which old brands to exclude, and how to price products in the category. The retailer is free to accept or reject any of the recommendations provided by the category captain.
Category captainship practices vary depending on the retailer, resulting in a continuum of practices. At one end of the spectrum, some retailers implement the category captain's recommendations as they are; at the other end, some retailers filter the recommendations provided by the category captain and verify their appropriateness before deciding on the implementation.
Many retailers and manufacturers practice category captainship and report positive benefits. To give but one example, Carrefour and Colgate partner in the oral care category. Based on a number of consumer studies, Colgate suggested that Carrefour restructure its oral care displays to merchandise toothbrush products above toothpaste products, as opposed to next to each other. As a result of the restructuring, Carrefour reported a 6-16% sales increase1. Colgate's sales also...