Theoretical and practical approaches of category management in the fashion industry - Sîrbu Mirela Octavia ASE - Faculty of Commerce

Theoretical and practical approaches
     of category management
       in the   fashion industry
           Category management framework
                          Sîrbu Mirela Octavia
                   ASE – Faculty of Commerce

Introduction
1. Category management framework
2. Category management in fast fashion
3. Particularities of category management in the
   fashion industry
References

Introduction
 Nowadays that traders offer an increasing number of
goods and that consumers’ mentality and preference
have changed significantly, applying the strategy of
quick response and using fast fashion techniques
have generated major modifications to the producer-
consumer       partnership.    Within this   context,
implementing the process of category management is
meant to assist both traders and suppliers in
achieving their objectives at high levels of
performance; sales and profits need to increase,
while satisfying client needs.

Category management framework

  CM is above all a marketing of the retailer, conceived
 within the framework of a partnership between
 manufacturer and a retailer. It is very often
 determined by the supplier, and applies to a product
 category, its internal dynamics and potential
 developments. The final objective is to generate
 additional sales and to reduce costs at the same time,
 especially, but not only, those of the customer, that is
 to say those of the retailer [Dussart,1998].

Category management framework
   CM: “The strategic management of product
 groups through trade partnerships, which aims to
 maximise sales and profits by satisfying customer
 needs” [ IGD, 2002, p. 1].
   Category      management      improves     turnover,
 profitability, market share, inventory levels, trading
 relationships, and consumer understanding.

The definition and role of category
           management
 It represents an ECR management strategy;
 A consumer-oriented planning tool common for all
  partners within the supply-delivery chain;
 Mainly, category management is seen as a step-by-
  step planning and the implementation of this process
  helps sellers as well as suppliers achieve their
  objectives at a high level of performance.

Defining the management
              categories
 It represents a process that fluctuates in terms of
  dimension, the degree of seller specialisation, but
  also in terms of the way in which consumers
  purchase the respective products.
 Generally, the products of a category must be able to
  substitute each other and the differences lie in
  criteria, such as brand, aroma, colour, quality or price.
  In other cases, the products in a category can be
  complementary, the consumers considering that it is
  logical to find them displayed together.

Fields of application

 Category management has been predominantly used
  in the consumer goods industry;
 presently, the implementation of the category
  management process is developing in other sectors
  as well;
 generally, the application of category management is
  performed by multinational companies and by
  international     supply chains, with a practical
  experience in this field in developed countries.

Category management framework
Source: BearingPoint, Effective day-to-day category management, 2011

The process of category
             management
 It represents the process of governing management
  category s as strategic business units with the purpose
  of enhancing the outputs of businesses by focussing
  on the value of deliveries to the consumers;
 management process of a homogenous category of
  products, the category management represents a
  means of managing products at category level and not
  at the level of the product;
 it includes the optimisation of three important
  processes: launching the products, promoting the
  products, managing the assortment.

Basically, category management, seen as a
step by step, consumer oriented planning,
contains three key elements – defining the
category,     planning  the    category     and
implementing the process – each with distinctive
features according to the nature of the goods
being traded.

The process of category management
                                                  Determining the products that form a category
                                                  starting from the consumers’ opinions.
                        Defining the category
                                                  Taking into consideration the role of the subcategory
Defining the                                      or of a storing unit of each category.
category                Establishing the role of Developing a strategic plan for each category in
                        the category within the terms of the long term trends.
                        total assortment
                        Establishing the method Determining the way in which every category can be
                        to       measure      the assessed.
                        performance of each
                                                  Taking into consideration the different costs and
                        category
                                                  profitability.
                        Formulating a strategy Developing a marketing and supply plan so that the
Planning the category   for each category         short term as well as the medium term category
                                                  objectives may be achieved.
                        Establishing the mixed Determining the different tactics included in the
                        marketing of the category marketing and supply plan, as well as the allocation
                                                  of spaces, advertising etc.

The process of category
                      management
                                  Establishing the role of category Tracing the responsibilities related
                                  management                        to the implementation of category
Implementation     of    category                                   management for sellers and
management                                                          suppliers.
                                  Evaluating the category           Measuring,      controlling      and
                                                                    modifying the category.

 Source: Varley, R., " Retail product management – Buying and merchandising ", Routledge, London, 2006

2. Category management
               in fast fashion
 Fast fashion retailing requires a fast response in
  terms of product, promotions and ranging supports.
 The fashion industry category management would be
  complementary to quick response (QR) strategies.
 Category    management     offers   retailer-supplier
  partnerships in the fashion industry an important
  adjunct to the industry’s quick response methods
  [Dewsnap&Hart,2004].

Fast fashion
   Fast Fashion is defined as an expression
that is widely accepted by a group of people
over time and has been characterized by
several marketing factors such as low
predictability, high impulse purchase, shorter life
cycle, and high volatility of market demand”
[Fernie & Sparks 1998, Bhardwaj 2009].

Understanding the FF concept requires a double
approach: from the perspective of the supplier and of
the buyer.
    Thus, from the supplier’s point of view, the
emergence and implementation of the FF strategies
have been generated by the need to provide an
increased flexibility to the supply chain, against the
background of the increased assortment diversity and
rapid changes in the structure of the demand.
   As for the consumers’ approach, FF is a concept
resulted from the mutations occurred in the consumers’
behaviour, particularly with regards to their wish to find
immediate diversity and satisfaction.

Motivations for adopting category
 management in the fashion industry
1. Clear outline of the category manager responsibilities with
   respect to assortment planning corresponding to the entire
   category, collaboration with suppliers, selection of
   merchandise and setting the prices, as well as for
   coordinating the product advertising activity. This way the
   success or failure of a category depends on the activity
   performed by the category manager;
2. Enabling the assortment management process with the
  purpose of maximising profits as a consequence of the use
  of category management. Category management ensures
  the optimal assortment structure based on categories of
  suppliers so that performance indicators reach maximum
  levels .

Limitations of the category management
   application in the fashion industry
 Reticence of suppliers in the implementation
  process of category management as a
  consequence of the fact that the sellers in the
  last link of the supply-delivery chain obtain the
  largest part of profits;
 Suspecting retail sellers that are representative
  in practicing quick response techniques, of
  infringing intellectual property rights by copying
  the patterns of famous designers.

3.Particularities of category
  management in the fashion industry
 In the condition in which assortment management in the sale of
  fashion    products     emphasises    category   management
  increasingly more, the size of the assortment comes in new
  shapes, which are adapted to the grouping criteria customised
  in terms of the end-consumers’ wishes and needs.
 Whether to establish and administer category management in
  accordance with the quick response principles depends on the
  sellers’ degree of acceptance/dismissal of products. This
  degree is influenced and significantly varies depending on two
  criteria: the level of acceptance of fashion products (quantified
  through sales) and acceptance duration (measured in time units
  - weeks, months). In terms of these two factors, there are four
  types of fashion cycles: flop, fad, ford and classic .

The assortment management
          throughout the fashion cycles
       Fashion cycle        Particularities of      Financial implications    Implications in the
                        assortment management                                   sellers’ image
Flop                   Avoiding the inclusion in   Cause major losses when Tend to affect the sellers’
                       the assortment; some of     they become obsolete    image
                       the "flop" products are
                       unavoidable, being a part
                       of the risk assumed;
Ford                   Storing in the beginning   Since they allow for the       They      generate    the
                       of the fashion cycle       sale at a relatively high      outline/preservation of a
                                                  price, they generate a         favourable image
                                                  high level of profitability,
                                                  but do not exclude risks
Fad                    It is mandatory to include Long-term profitability,       The absence of these
                       them in the assortment, as a consequence of high          products constitutes clear
                       all the more because they and stable demand               premises for the damage
                       cover a variety of prices                                 of the sellers’ image on
                                                                                 the market

Defining elements in establishing
    category management in stores
 specialising in selling fashion products
 The existence of a restricted and profound assortment of merchandise;
 The quality of the products that are being sold and their origin,
  throughout an optimal management focussing on the sale of high
  quality products with the brand of the producer;
 The availability of products in an attractive variety of sizes, colours
  and models;
 An important role in establishing the assortment belongs to the
  determination of the seasonal stocks and to the readiness of adapting to
  the fashion trends, these representing two defining criteria in
  assortment planning;
 In the case of notorious products, the price policy is focussed on levels
  superior to the average ones practiced in this sector, except for the
  discount periods;

Defining elements in establishing
     category management in stores
  specialising in selling fashion products
 Ensuring the coherence of sold products,
  respectively the compatibility of the product
  families and the complementarity between the
  needs that the store wants to satisfy and the
  products it sells. At present, it is important not
  only to ensure coherence in terms of products,
  but also in terms of strategic options for
  establishing the assortment correlated with the
  clients’ desires.

Defining elements in establishing
    category management in stores
 specialising in selling fashion products

a) The coherence between the products sold as a
   consequence of complementarity that exists between
   garments and leather goods, respectively accessories;
b) The coherence with respect to clients due to the sale of
   quality products for prices specific to those of boutiques;
c) The coherence with respect to the competition by
   including in the assortment structure the items
   manufactured of quality materials and with a fashion
   specific tailoring, at the same time maintaining the line
   matching the personality of the brand, which belongs to
   the company analysed;

Methods to implement category
management within stores specialising in
       selling fashion garments
Criteria for defining a category:
1. Clear delimitation according to the three families
   of products sold: garments, leather goods and
   accessories,
2. Clear delimitation according to the consumption
   universe of the respective products, appointing
   staff responsible for the following categories: work
   wear, ready-to-wear, evening attire and occasion-
   ready garments.

Notes:
 Each of the staff responsible for a
  management category is assigned with the
  task of managing that category from the
  producer up to the sale to the consumer.
 Within     many      trade   companies,    the
  responsibilities for acquiring the merchandise
  are split between a category manager and a
  member of the staff responsible with
  assortment planning.

Specific responsibilities of the
      category manager in fashion
 Identifying the development objectives of the businesses
  in accordance with category management, elaborating
  strategies to implement category management and to
  achieve performance
 Identifying and developing new Fast Fashion business
  opportunities
 Identifying and selecting competent suppliers, training
  and consolidating relationships with license holders and
  with the key retailers in order to maximise opportunities
 Substantiating and developing the franchise strategy in
  case those businesses are developed within this
  business system

Specific responsibilities of the
      category manager in fashion
 Coordinating the negotiation, logistics, marketing,
  merchandising and actual sale activities for the
  respective management category
 Setting the merchandise prices
 Adapting the offer to the local particularities with
  respect to the buying behaviour
 Capitalizing in the sense of obtaining maximum
  benefits from the category management with a major
  contribution in the sales volume (top products)
 Promoting and enhancing the identity of the company
  they represent.

References
 Birtwistle, G., Siddiqui, N. and Fiorito, S.S. (2003), “Quick response: perceptions of UK fashion retailers”,
International Journal of Retail & Distribution Management, Vol. 31 No. 2, pp. 118-28

Dewsnap,B. and Hart,C. (2004) "Category management: a new approach for fashion marketing?",
European Journal of Marketing, Vol. 38 Iss: 7, pp.809 – 834

 Dussart, C. (1998), “Category management: strengths, limits and developments”, European Management
Journal, Vol. 16 No. 1, pp. 50-62

ECR Europe (2000), The Essential Guide to Day-to-Day CM, ECR Europe, Cologne

 Sheridan,M., Moore,C. and Nobbs,K. (2006 ), "Fast fashion requires fast marketing: The role of category
management in fast fashion positioning", Journal of Fashion Marketing and Management, Vol. 10 Iss: 3,
pp.301 – 315

Sirbu M. and Saseanu A. (2012), " Quick Response strategies in Fashion Industry ", Journal Supply Chain
Management Journal - 2012, Volum 3, Number 2, pp.44-57

Swoboda, B; Pop, NA; Dabija, DC. (2010) " Vertical alliances between retail and manufacturer companies in
the fashion industry ", Amfiteatru economic, Editura ASE

Varley, R.. (2006), " Retail product management - Buying and merchandising ", Routledge, London

Vişean, M.O. (2004), " Tehnologii comerciale " , Editura ASE, Bucureşti

BearingPoint (2011), Effective day-to-day        category   management,      http://www.bearingpoint.com/en-
uk/download/BENO1167_CatMgmtWP.pdf