If your company sells fast moving consumer goods or general merchandise, you’ve undoubtedly been using “category management ” techniques for years. But like everything else in the retail operational model, it’s probably time for you to look at the category management process, to see if its helping or getting in the way.

First though, let’s get back to what “it ” is. Here’s how Wikipedia describes it:

“Category management is a retailing and purchasing concept in which the range of products purchased by a business organization or sold by a retailer is broken down into discrete groups of similar or related products; these groups are known as product categories (examples of grocery categories might be: tinned fish, washing detergent, toothpastes). It is a systematic, disciplined approach to managing a product category as a strategic business unit. “

Here’s how it works: for each category of merchandise carried by the retailer, sub-categories are identified as “destination “, “routine “, “seasonal “, or “convenience ” oriented, and items are assigned roles such as being a “traffic builder “, a “transaction builder “, or a “profit builder “. The planning process uses consumer demographics, past sales trends, competitive assortment and price info, and manufacturer (supply) data to determine the assortment and the number of product facings, on-hand quantities, re-order points, and re-order frequency. Price, promotion, and space plans ( “planograms “) are influenced by category plans. Once the plan is generated, stores execute each category plan “just like the picture ” (i.e. following the planogram), and retailers use sales tracking systems to monitor actual results compared to category plans, making periodic adjustments to the plan as necessary.

Like merchandise planning processes across every retail vertical, category planning was and is overtly product oriented. The underlying assumption that retailers and their supplier partners made was that consumers investigate and select products within the four walls of the store. In other words, consumers would buy what retailers have to sell them. But if the plan was flawed in some fundamental way or the assortment had to change, it could take months for a new one to be rolled out. And that’s a problem in today’s retail environment.

So What Has Changed?

As retailers everywhere are learning, relevance is replacing price and convenience as a primary demand driver for consumers. As RSR has said many times before now, for retailers it is no longer a question of what they and their partners want to sell, but what consumers want to buy.

The days of “one size fits all ” assortments are clearly over as far as consumers are concerned. RSR’s benchmark studies consistently show that winning retailers (those who over-perform compared to their competitors) are redefining their value proposition away from focusing solely on low-differentiating value drivers like price and convenience, and more towards meeting dynamic, ever-changing needs of more focused groups of consumers. To make that happen, retailers need to find ways to capture and then measure consumer sentiment about the offer before the assortment is finalized.

The difficulty for category planners is that greater granularity always adds complexity: store level assortments are more localized and product adjacencies change, and even the store flow can differ based on the behavioral characteristics of local shoppers. The good news is that modern merchandising systems are capable of planning for as much granularity in the assortment plan as a retailer wants or needs. But while the ability to plan localized assortments and space plans is a big improvement over “one size fits all ” planning, the ability to optimize plans with more targeted localization still does not address how retailers will implement those plans quickly and with fewer mistakes.

And that’s where virtual reality (V-R) technologies come into the conversation.

Let’s Get Virtual

I think the days of developing a category plan, testing it first one store, then several, then for a district, and finally for the chain, are over. It just takes too long, and it involves an excruciating amount of store labor hours and months to accomplish. And there’s no room in the schedule for multiple iterations. If the plan is wrong, it tends to stay wrong for a long time.

The discussion should segue to “virtual reality ” technologies. I’m sure you’ve seen pictures of “millennial ” types wearing ungainly goggles so that they can experience the next generation of computer games. If you’re really adventurous, you took a ride on The New Revolution Virtual Reality Coaster at Six Flags in Los Angeles. But the new technologies are not just for fun-and-games – there are business applications too. That’s exactly what global retail solutions provider Symphony GOLD was thinking with the acquisition of UK-based Fifth Dimension, a company that has developed 3D store and product visualization solutions, last April.

Working with the Symphony GOLD team, the developers from Fifth Dimension have put together a next-gen category management capability that answers the dual challenges of greater granularity and localization of merchandising plans, and the need to “get it right ” before rolling plans out into the real world, with modeling technologies and V-R.

The company hopes that rather than viewing category management as a discreet optimization process used to extract every ounce of sales and profit from a highly standardized assortment, with its next-gen category management solution with V-R capabilities retailers will be able to develop plans based on consumer behavioral insights that in turn are tested in virtual models before being rolling out to real stores.

I have to admit – overcoming my Baby Boomer skepticism about V-R doesn’t come easily. But I’m excited to learn that tech firms are using this technology to solve a real problem – how to make grocery and general merchandise stores more relevant to the consumers they serve. It’s an important step, because even though we all have to take care of the basic needs of living, the stores that sell the products that meet those needs tend to be big, impersonal, and (frankly) so boring that shoppers look at price and convenience- but not much else.

But it doesn’t have to be that way. Consumers demand relevance, and retailers can define what that word means in the context of their Brands. V-R technologies might be just the ticket to enable next generation Category Management processes help retailers create a better shopping experience.