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Online category management: 5 principles to help CPGs succeed on the digital shelf
Little attention has been paid to what the shift to online means for CPG category managers. We’ve summarized the 5 principles for successful online category management.
This post has been updated and was originally published June 04, 2021.
As CPG companies continue to adapt to the shift to online, I believe not enough attention is being paid to what the shift to online means for category management.
A lack of bandwidth is part of the problem. Although ecommerce has grown exponentially, it’s still a drop in the bucket compared with brick-and-mortar sales. This makes it easy for category managers to default to a store-first mentality, and feel justified in doing so.
There are also understandable growing pains. The move to ecommerce requires a fundamental change in mindset. Even the most digitally-minded CPGs I work with find it takes time for that to fully trickle down through their organizations.
But as we emerge from Covid, it’s time to think more seriously about what effective category management looks like on the digital shelf.
Here are five principles category managers should consider.
Principle #1: Think omni-first for assortment
To win on the digital shelf, your assortment strategy needs to be omni-first.
Shoppers don’t buy online the way they buy in store. Category managers who don’t take account of the differences will lose out on sales – online as well as in-store.
Large pack sizes are a good example. They are already more prone to run out than smaller sizes because you can fit fewer of them on shelf, plus they over-index with online shoppers. In a world where most grocery retailers now operate a pick-from-store model for either delivery or curbside pickup, those larger packs are going to run out even more quickly.
That’s why category managers need an assortment strategy and a shelf strategy that align with the demands of omnichannel retail. In other words: Take an omni-first lens to everything and be prepared to dedicate more shelf space to items that sell better online than in store.
Principle #2: Aim for good distribution across price tiers
One trend we saw during the pandemic was people splurging more on premium grocery products.
Unable to go to bars and restaurants, many locked-down shoppers treated themselves to luxury wine, steak, coffee, and cheeses from the grocery store. Increased interest in health and home cooking also helped to push up sales of premium items.
As the world started opening up and consumers are not restricted to supermarkets alone for their shopping trips, category managers need to look at the balance of their portfolios and make sure they have a strong assortment across every price tier.
Putting too much emphasis on either end of the price spectrum could be risky. To do well post-Covid, you’ll need a balance across all price tiers especially as economic turmoil amid inflation is yet on the horizon.
Principle #3: Proactively manage search
With most add-to-carts coming from the first five search slots, no CPG category manager can afford to ignore search.
Identifying your highest-priority items and focusing on getting those into baskets is critical. This means taking time to really understand your retailers’ search algorithms so you can win in organic search, and proactively managing spend on paid search.
Resist the temptation to spread your search dollars too thin. Because those top five search positions are the most important, you need a clearly defined search strategy that helps you get it right on a few key priorities.
These could be your highest-selling online items or new innovation. Whatever it is, make sure you’re crystal-clear about which parts of the assortment you want to focus on and what you’re trying to achieve.
Setting priorities is everything when it comes to search. Rather than trying to win on 100 search terms, focus on the 10 that really matter.
Principle #4: Condense product listings where possible
One of the key insights from shopper psychology I learned during my time at P&G is that people deselect products before they select them. They filter out anything that’s not relevant to them before they narrow down what they want and put a product in their basket.
This is easy to do in store, where there are visual cues helping shoppers navigate the shelf, but much more challenging online. For any given item, there could be multiple different flavours, formats, or pack sizes, all with their own product listings. Unless your online content is super clear and well structured, shoppers will struggle to narrow down their choices.
A good way to address this is to create condensed product pages that allow shoppers to explore all variants of a product from within a single product page. Not all retailers enable this functionality at the moment (Sephora does it best in the US, in my opinion), but where it is available category managers should focus on executing it well.
They should also seek conversations with other retailers to try to influence them to enable this type of technology. Online shopping can be overwhelming. Having all the relevant information available in one, easy-to-navigate listing really helps the shopper figure out what they want to buy.
Principle #5: Don’t set it and forget it
Few things get CPG category managers into trouble faster on the digital shelf than a ‘set it and forget it’ mentality.
Just because you’ve set up your content and your products correctly with your PIM or the retailer doesn’t mean they’ll stay that way forever. There are lots of reasons why content gets messed up or changed, so you can’t assume that doing it once means you’ll never have to look at it again.
One common problem I see is online images being pulled in from retailers’ own asset libraries instead of the gold standard image provided by the supplier. This is easy to fix, but it requires somebody to spot the problem in the first place.
Monitoring is a key aspect of effective online category management. To succeed on the digital shelf, CPG category managers must pay attention to detail not just today but every day.
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