CATEGORY MANAGEMENT IN E-COMMERCE

How does Category Management work in e-commerce?

Despite Amazon's omnipresence in the online market suggests otherwise, the online trade in goods and services was a market niche until 2020’s Spring. The start of the COVID pandemic had a huge impact on this kind of market due to its restrictions. Customers had to try new options to satisfy their needs because they were afraid of in-store infection, they started to experience a lack of flexibility due to full-time childcare at home and they had to adapt to new home-office arrangements, among other things. As a result, e-commerce consumers have multiplied in a fairly short period of time, leading to an increase of more than 40% in FCMG sales in Germany only in 2020; with an upward trend for 2021! 

Currently, many new providers are entering the market. The delivery areas are no longer limited to the big cities but are gradually expanding. And quick commerce services, that guarantee delivery within an hour (sometimes within 10 minutes), are being promoted for their market entry and expansion. So, there is a clear trend!

Reduce reservations

Buyers' initial concerns about the technology hurdle and the quality of the goods delivered have been overcome. Now it is up to retailers to justify this trust and to maintain or even strengthen the trend even after the pandemic. After all, every customer who has enjoyed a positive online shopping experience is very likely to repeat or even intensify this type of shopping.

Today, it can be said that retail can no longer exist without an online offer. But manufacturers must not miss this opportunity either and must use the potential of e-commerce to get in touch directly with the buyer. Accordingly, the key to an optimal presence in the digital sales world lies in category management. 

But how does Category Management work in e-commerce?

The basic principles of the conventional category management process can also be found in e-commerce. Above all, the philosophy is that all efforts must serve to improve the shopping experience and that the focus must be on the customer and his or her needs. Therefore, the special aspects of category management, which do not exist in this form in classic store-based retailing, will be addressed here.

Anyone who has goods to sell must be clear about the consumers they want to address. This is usually defined by the goods offered (the assortment), the calculated price, and the location and equipment of a shop. In the absence of a physical store, whose location can be analyzed and strategically evaluated, the task in e-commerce is to create a virtual perceptibility. On the one hand, it is important to invest in search engine optimization to appear at the top of the results list for certain search terms and, on the other hand, to strategically place access points on related pages in order to draw the attention of interested users to one's own offer. It is important to enter the consumer's consciousness exactly when the topic of the currently accessed page corresponds to the retailer's offer.

The assortment to be offered must correspond to the role of the category at the retailer. Because the limitations of a salesroom are non-existent, there can be considerably more profiling and core categories in e-commerce than can be established on the sales floor. However, the product groups must also be compiled for e-commerce from the customer's point of view. The physical shelf is now replaced by search masks and filter options to get to the desired product with as little user input as possible. Here, too, it is important for retailers to understand their consumers’ behavior throughout the category. To do so, tools must be aligned with the respective customer decision tree.

In the process of product selection, the customer can be supported with some additional functions. These include, for example, a clear product description with meaningful images and videos, a serious rating system as well as suggestions about useful additional products or recipe suggestions for food. Furthermore, it should be taken into consideration the availability of the entire product range. As it happens with out-of-stocks on the shelf, customers also feel frustrated when products are not available online, and this also increases the risk of switching the shopping location.

When it comes to pricing, it is important to bear in mind that the online customer already knows how to utilize the omnichannel and had already become a “smart shopper” quite some time ago. Product information is collected and compared in the most various ways, online and analog. And if a supplier cannot offer additional services such as delivery, warranty, or repair, it is not possible to argue for an above-average price.



The payment process is always a very critical point for all buyers in e-commerce. If you want to and can give your customers a trust bonus, you can offer the purchase on account, in which you only have to pay after receipt and inspection of the goods; which is most similar to the process in traditional retail. Payment when ordering is currently the usual procedure and is problem-free after the first positive experiences with the quality of the delivered products. But in general, it is important to make this process as simple and clear as possible. The customer must be able to understand each step of the transaction and always be able to cancel it if necessary. In the event of cancellation of an order, the amount must be returned immediately. This is the only way to gain the trust of customers.

The Delivery is the only point in the supply chain where direct customer contact can be established. If professional parcel services are used for this, the retailer's influence is of course very limited. However, when selecting the delivery service, attention should be paid to the service level and feedback from the buyers should be obtained. Because a bad delivery is always associated by the customer with the provider of the goods. If the provider himself is responsible for delivery, he must ensure a pleasant and smooth process. Specified deadlines must be met and other services such as returns should be guaranteed.

Advantages in e-commerce

It is a great advantage to be able to personalize every act of shopping in online retail. The entire selection process, i.e. which articles were accessed for how long or via which links the products were selected, can be analyzed. This means that the decision-making process can be viewed system-immanently, and conclusions can be drawn about the customer decision tree. In this way, individual marketing campaigns and offers can be targeted to customers.

In the case of returns, you will usually receive an indication of the reason for the incorrect purchase. This can also lead to general product analysis and targeted solution offers for the customer. These are all measures to intensify customer loyalty.

The internet has driven globalization to an extreme and brought the whole world into one's own living room. This is also the case in e-commerce; there are neither spatial nor temporal boundaries. The customer can act at any time from and at any place in the world. Retailers must take advantage of this fact. However, this requires an international customer approach and fast response times, even at night or on weekends.

So we can see that e-commerce not only poses a threat to traditional retail. E-commerce also opens up opportunities for suppliers to work globally and interact directly with consumers. To do this, however, they must adapt to the new situation and, above all, exploit the extensive advantages. A structured category management can provide significant support in this process.



 

Michael Krebs
Senior Business Consultant at Wysupp

14 September 2021

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