Secret of Distribution: Category Management in Peru

An interesting detail is that on her list some products have brand names and others don’t. In 50% of the cases, a housewife decides which brand to buy after she has entered the store, choosing from the many alternatives offered. That’s why merchandising and the power of the provider are very important. Most probably, she will buy the brand which has the better sale price or that includes a special offer or discount, or the one she remembers the most at that time.
With this in mind, the mix of products, their display, stock and distribution are issues that gain more importance. The distributor will try to maximize the space in his store. By applying simple logic, he will try to have a supply diverse enough to offer his customers the products which sell the most, and among those, the ones that are in higher demand or, alternatively, those that are on promotion at the time (since this implies the consumer would be aware of it and is most likely to ask for it).

Most companies battle in order to position their brand into the mind of consumers so they will choose their brand at the point of sale in order to sell and gain more. Most companies know that to be noticed at the point of sale they have to know how everything about consumer behavior inside the stores.

In this context is that the Category Management is developed. Through this process, companies and distributors can better understand how the consumer behaves and how do they decide which products to buy while they are in the store or point of sale.

“An attractive definition of the concept is: an integral process between provider and store administrator in order to treat categories as units and business strategies, with the aim of providing better results through an approach based on delivering more value to consumers”, says Antonio de Díaz Castro of the ESIC business and marketing school. This is where the idea of a partnership between provider and store comes from.

The basic concept of category management is to offer a complete solution for each category, by supplying the right category at the right time, the right place and in value that is more attractive for the consumer.

This management process implies a deep understanding of consumer behavior and their preferences, with the purpose of selecting more accurately the products that should be offered, the type of promotions to implement, its display, etc.

Category management helps to establish which product should be on display at the point of sale, by determining which, how many, at what price, where, how and in which variety.

But this marvel can only be accomplished by using technology, working in total harmony and sharing all the information needed, trusting that each partner –provider and seller- will use it wisely and for better sales purposes.

The application of Category Management is mainly seen in auto services, the Group Wong and Supermercados Peruanos that are already implementing these tools to manage some categories.

The challenge is how will we do to apply it in our country, where most consumers buy their products in little stores around the corner and in popular markets, which altogether reunite more than 130,000 points of sales.