Space and Category Capability Development

Client Situation

  • A young supermarket and convenience store retailer in Azerbaijan with ambitious expansion plans to achieve market leadership.
  • Fragmented market, many small independents. Emerging SME’s vying for greater share of the expanding modern grocery sector.
  • Wholesalers/distributors dominate the buying relationship across multiple sectors. Prices maintained at high levels, especially on imports, and limited range choice. Selling prices are set on a fixed margin ‘cost-plus’ basis by category.
  • Buying capability below western standards with buyers lacking skills needed to engage with suppliers on an equitable basis.
  • Stores planned and ranged in an ad hoc way with little standardisation and largely influenced by local retail management.
  • Systems simple or non-existent and a lack of centrally defined written down processes results in wide variations in space use, range construction, and merchandising. Inefficiencies undermine the day to day operation.

Our Approach

  • A ‘Back to Basics’ approach was taken to establish western style category management processes and skills starting with a review of company strategy and how it informs the allocation of space, assortment planning, and merchandising.
  • The category hierarchy was reviewed to establish suitability for both category management and space management purposes.
  • An audit was done to establish the ‘As Is’ space across all categories in all stores resulting in an accurate space database.
  • A process was followed for a quick evaluation of return on space to determine immediate opportunities for improvement.
  • A set of space rules was created as the framework for space allocation in new stores and for right-sizing space in existing stores.
  • Category Managers were upskilled to equip them with western style processes to construct customer focused ranges.
  • A cross functional ‘Category Hothouse’ workshop approach was used for the chosen ‘Destination Categories’ to establish the ‘As Is’ and map out an implementation plan to deliver the ‘To Be’.
  • Merchandising principles were reviewed to establish simple best practice rules and guidelines for training and implementation.
  • Merchandising and replenishment processes were set up in preparation for a new space management and merchandising system.

Business Benefits

  • Category Managers were equipped with clear processes supporting a defined and communicated company strategy enabling them to manage suppliers consistently across multiple categories.
  • The centralised control of space enabled category managers to better forecast demand and negotiate sourcing plans with suppliers.