Saturday, April 23, 2011
The Case Against Category Management – Let’s Go Fishing
I have two ponds in my front yard, and the Pearl River running through my back yard. One pond is stocked with brim and catfish, the other with white perch and catfish. The river has everything in it from one-hundred pound catfish to massive turtles as big around as coffee tables. Each fish and each environment calls for a specific bait. The brim prefer live crickets, and I do better with the perch using a tiny yellow jig on a casting rod. Catfish on the other hand are bottom feeders and prefer something REALLY disgusting.
I look at retail stores in the same way as I look at fishing. In order to catch what you want, you have to use the right bait for the environment you’re working in; the main differences being: the demographics are a great deal more complicated, and the customers, a lot more particular. I wouldn’t fish for small brim with live shrimp as it would be too expensive and the brim would probably avoid it anyway. Likewise, if a customer hounded me to stock Matsutake Mushrooms at $1,000/pound for his convenience, the chances are I might lose his business pretty quick.
Mass marketing Walmart style, may have run its course in the U.S.A. An indication of this may be Walmart’s dismal figures and its experimentation with Walmart Express. Something is happening in America and the big boys are on to it. Shoppers are getting more selective about their purchases and making it harder to be “all things for all people”. Just as there are profitable and unprofitable stores, the same can be said for suppliers, categories, items within categories, and even a retailer’s clientele.
While New York City was struggling to solve the problem of horse manure in their streets, some visionary invented the automobile. He didn’t do this to solve New York’s specific problem. That little caveat was, as they say in Louisiana, “Lagniappe.”
It’s an age old scenario. Some businesses struggle in the quest to solve a particular problem while they miss, often even deny, the existence of available technologies that will eventually demote them to the status of ‘pooper scoopers’ somewhere down the road… dragging their most loyal supporters with them. Every day, computers are becoming faster and more capable of solving many of our problems, and creating misery along the way. If the IT department for a company does not keep up with these advancements in technology, they are likely to find themselves in similar circumstances.
Over the past three decades, the chosen environment for most small businesses has been desktop PCs and Windows operating in a Client/Server environment. For many, it’s hard to think there might be a better way to solve their problems. Couple this with the fact most companies have invested heavily in legacy technology, e.g. Client/Server, the tendency to deny the existence of anything that might be better is unthinkable.
As you consider the steps I have suggested in Exercises 1, 2 & 3, you may have seen the trap you have fallen into. You may have said, “Yes, that all sounds very good, but I don’t have the time and resources to devote to such a plan.” If all you know is a fishing poll made from a stalk of cane, you may not be able to envision landing a two-hundred pound marlin in the Gulf of Mexico. Technology will continue to evolve with or without you. In the face of all that has happened in the industry over the past few years, it’s past time to start considering new alternatives. Not only can you afford to consider new management ideas, you can’t afford not to; and with it, the de-emphasis on CM and a far more superior method of controlling your stock.