Is Retail Category Management Worth the Effort (and Does a Category Captain Help or Hinder)?

Abstract

Category management (CM) is challenging for retailers that sell thousands of products across hundreds of categories and often lack the resources and capabilities to manage all of them intensively. Some retailers respond by picking one supplier to be a “category captain” that manages the category—including rivals’ brands—on their behalf. Others worry that influential captains will be opportunistic and that the benefits of intensive CM are simply not worth the costs. However, there is little conceptual development or empirical evidence concerning CM best practices. The authors develop a comprehensive model of retail CM based on a synthesis of field interviews and relevant literature, especially work on governance value analysis theory. Their test of the model using category and financial growth data from U.S. supermarket chains shows that more intensive CM improves results. Furthermore, use of a category captain increases CM effort and results, without increasing opportunism or problems with other suppliers. The authors also find that retailers with more resources are less likely to rely on help from a category captain; yet the level of retailer resources is not related to CM intensity. Thus, “go-it-alone” retailers do not deploy their own resources on CM and miss out on the corresponding performance improvements.