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Basic Category Management

During the recent NACS Convention in Las Vegas one of the most pervasive topics was category management. Discussions ranged from how to get started to the latest tools available. However, for many operators the most important area of category management is not if the item is a "Traffic Builder" or an "Image Creator," but do you have the right items in stock?

Many of the companies that b2b Solutions work with have systems capable of doing a variety of category analysis, but lack the processes to ensure that the right items are in the right stores at the right inventory levels. Too many c-store get plan-o-gramed when they are opened and then the center store items are not changed unless the operator changes their primary distributor and does a reset.

Do your clerks notice when a customer is searching for an item that they can’t find and ask what they are looking for? Do you have a "customer request" list? Do you shop your competitors to see what they stock? When is the last time you checked the supermarkets in your area for what they are selling? If the answer to these questions is no, then how do you know you have the items you should be carrying?

On the other hand, have you conducted a "Dust Test" to see how many items have been there so long that they have collected dust? It is a very simple, but effective, way to see what items you might want to discontinue. Another way is to request an annual item velocity report for your location(s) from your primary distributor. There may be a small fee attached to having the report generated, but we have found it to be a very good tool to determine what stays and what goes. We often find that shelf space is being devoted to items that move less than one (1) unit per month! If you determine that room is being taken up by items that don’t sell, consolidate the sections and consider alternative uses for the space including adding a beverage aisle.

Customers are very loyal to their "brand" in your top three categories - cigarettes, soda and beer. In fact, studies have shown that c-store customers will switch stores before switching brands. For these categories there is another simple tool that should be used – "Build To" sheets. This simple process can provide not only what is selling, but also what level of inventory you need to carry to ensure you are in stock, but not overstocked.

To get started create a list of the items you carry in each of the three categories (see example below for two Coca-Cola SKU's):

Item

B/To Inv. Order Sales Inv. Order Sales Inv. Order Sales Inv.
Coke

 

 

 

 

 

 

 

 

 

 

 

Reg. 20 oz.

16

10

10

13

7

10

11

6

10

14

2

Diet 20 oz.

7

5

5

4

6

6

5

7

4

5

6

* Sales are calculated by adding the inventory (inv.) and order columns and then subtracting the value of the next inventory.

After tracking purchases, inventory levels and sales for a period of time, you can easily determine the level on inventory (Build To) you should carry on a regular basis (including any safety stock level you select). Once that number is determined the operator can simply order the difference between their inventory level and the build to number. The Build To process should be an on-going one as seasonality and other factors will change the inventory levels needed over time. Build To sheets can also help you determine how much you might want to Bridge Buy – a topic for another article.

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