Category management in e-commerce: what does it look like, and why do you need it?

Anyone who works in sales has probably heard about category management at some point. It’s a crucial thing for business people! After all, it’s only through utilizing category management can they really guarantee that they don’t lose their positions in the market or their profits.

Category management stands for the organization of product categories, which solves everything in our modern world. Recall your last trip to the store: how long did it take for you to find yogurt? You know it belongs in the category of dairy products, which is why it is located on the shelf next to the milk. Imagine if yoghurt was classified, for example, as a dessert; how long would it take you to find it? Category management oversees the organization of retail space, both offline and online! It is the categories you need to develop when creating online store browsing, managing your range of products, and developing the design of your website.

Additionally, category management involves working with procuring. For example, knowing what every category of your products includes and what KPIs it is supposed to meet helps you choose only the best suppliers and negotiate the most favorable terms of collaboration.

Due to poor-quality category management or the lack of thereof, an online business can lose up to 30% of its customers, so a professional category manager is worth their weight in gold. So, what are their duties, and how do you bring maximum results to your business? We will tell you below.

What does a category manager do in e-commerce?

The main responsibilities of a category manager in the area of e-commerce include:

  • Analyzing data to determine market trends and consumer needs;
  • Developing strategies for category management;
  • Developing tactics for category development, merchandising, and promoting specific product items;
  • Communicating with suppliers, building long-term relationships and concluding favorable terms of cooperation with the best price-quality ratio;
  • Placing orders and dealing with procurements;
  • Placement of product categories to achieve maximum results;
  • Cooperating with the marketing and sales department within the company to ensure transparency and efficiency throughout all business activities;
  • Determination of the most competitive and profitable prices for product categories;
  • Demand forecasting and prompt replenishment of stocks;
  • Budgeting and cost optimization.

5 tips for becoming the best category manager in e-commerce

Category management is a true art that requires special training and exceptional skills, especially in e-commerce. Here are some tips on how to work effectively with categories:

1. Communicate regularly with suppliers and stay up to date

The primary task of a category manager in e-commerce is to ensure a steady flow of goods or services. Check your suppliers’ certificates and financial stability periodically, set stringent deadlines, and supply performance guarantees. Any fluctuation in the market can lead to trouble for suppliers, which, in return, means problems for yourself.

2. Increase your level of expertise

A category manager cannot know everything in the world. Still, they should strive to achieve this, given that the business’s stability from the perspective of turnover depends on this. You must understand new and old pricing models and keep track of investment results, including costs and risks associated with procurements. Of course, you will need individual professionals (for example, lawyers) for different aspects of this work. However, your task is to consider all the factors and work them out.

3. Plan categories down to the very last detail

The success of category management depends on the effectiveness of the categories you create. And to accomplish this, you must understand your audience and the details of every category by considering its role, purpose, performance criteria, etc. Expanded categories that can grow and develop make it easier to attract profitable suppliers and build strong relationships with them.

4. Use zero-based budgeting

Zero-based budgeting is a budget planning method that does not include the budgets from earlier periods. Instead, budget planning is based on sales forecasts, technical costs, and economic calculations. Since one of the main tasks of a category manager is to justify the created categories and budget requirements, this approach to budgeting in a category management setting is the most appropriate.

5. Don’t forget about digitalisation!

Category management in e-commerce is a top priority for online development and technologies. Therefore, the category manager must quickly implement the most effective innovative solutions in software and electronic systems or services to oversee product categories.

The job of a category manager in e-commerce is much the same as that in traditional retail: it is still challenging but extremely exciting! Perhaps nowhere else can you find so many new experiences, tools, and opportunities than in this field. Just don’t be afraid of using different innovative methods and continually developing both product categories and your professional abilities.