University of Economics, Prague Master’s Thesis 2016 Lucie Pospíšilová University of Economics, Prague Faculty of Business Administration Master’s Field: International Management Title of the Master’s Thesis: Continuous Management of a Retail Product Category Author: Bc. Lucie Pospíšilová Supervisor: doc. Ing. Jan Koudelka, CSc. Declaration of Authenticity I hereby declare that the Master’s Thesis presented herein is my own work, or fully and specifically acknowledged wherever adapted from other sources. This work has not been published or submitted elsewhere for the requirement of a degree programme. Prague, May 9, 2016 Lucie Pospíšilová Acknowledgements I would like to thank my supervisor, doc. Ing. Jan Koudelka, CSc. for his guidance. Furthermore, I would like to thank everybody, who provided me with necessary data and information and mainly my advisor from Ahold Czech Republic, Petr Hubený for his time and valuable advice. Title of the Master’s Thesis: Continuous Management of a Retail Product Category Abstract: The aim of the thesis is to describe the Czech retail industry and the practice used in the category management. The work compares and evaluates the current state of the ice-cream category management in different retail chains and recommends changes for the next ice-cream season for one of the retailers. The description of the retail industry and the introduction set the background for the thesis and the explanation of the continuous category management provides the framework for the analysis. The empirical part conducts the category planning step by step. The key parts are category assessment and category scorecard, which benchmark different stores in terms of assortment, display, price, and promo. Finally, recommendations and conclusions are derived from the analysis to improve the category performance. Key words: Category Management, Retail Industry, Benchmarking, Category Planning Table of Contents 1 Introduction ........................................................................................................................ 1 2 Retail Industry .................................................................................................................... 3 2.1 Types of Retailers ........................................................................................................ 4 2.2 Retailers Worldwide .................................................................................................... 4 2.3 Retailers in the Czech Republic ................................................................................... 6 3 Category Management ........................................................................................................ 9 3.1 Definition ................................................................................................................... 10 3.1.1 Merchandising .................................................................................................... 11 3.1.2 Further Terminology .......................................................................................... 11 3.2 Continuous Category Management Process .............................................................. 12 3.2.1 Retailer Strategy ................................................................................................. 13 3.2.2 Category Planning .............................................................................................. 14 3.2.3 Implementation ................................................................................................... 21 3.2.4 Performance Review........................................................................................... 21 3.3 Challenges and Benefits ............................................................................................. 22 3.4 Competitive Advantage ............................................................................................. 22 4 Methodology ..................................................................................................................... 24 4.1 Observations .............................................................................................................. 24 4.2 Analysed Stores ......................................................................................................... 25 4.3 Analytical Tools ......................................................................................................... 26 4.3.1 Seasonal Index .................................................................................................... 26 4.3.2 Regression Analysis ........................................................................................... 27 5 Ice-cream Market .............................................................................................................. 29 5.1 Market Structure ........................................................................................................ 29 5.2 Shopper Insights ........................................................................................................ 30 5.3 Summer and Winter Season ....................................................................................... 31 6 Ahold Retail Chain ........................................................................................................... 32 6.1 Retailer’s Strategy ...................................................................................................... 32 6.2 Target Customer ........................................................................................................ 34 7 Category Definition .......................................................................................................... 35 7.1 Consumer decision tree .............................................................................................. 36 7.2 Consumer perception ................................................................................................. 37 7.3 Seasonality ................................................................................................................. 38 8 Category Role ................................................................................................................... 40 8.1 Basket category .......................................................................................................... 40 8.2 Objectives .................................................................................................................. 41 9 Category Assessment ........................................................................................................ 42 9.1 Assortment ................................................................................................................. 42 9.1.1 Supermarkets ...................................................................................................... 42 9.1.2 Hypermarkets...................................................................................................... 44 9.2 Display ....................................................................................................................... 46 9.2.1 Supermarkets ...................................................................................................... 46 9.2.2 Hypermarkets...................................................................................................... 47 9.3 Price ........................................................................................................................... 49 9.3.1 Supermarkets ...................................................................................................... 49 9.3.2 Hypermarkets...................................................................................................... 50 9.4 Promotion ................................................................................................................... 52 9.4.1 Supermarkets ...................................................................................................... 52 9.4.2 Hypermarkets...................................................................................................... 54 9.5 Summary .................................................................................................................... 55 10 Category Scorecard........................................................................................................... 57 10.1 Sales and Margins .................................................................................................. 57 10.2 Category Influencing Factors ................................................................................. 59 10.3 Opportunities .......................................................................................................... 63 11 Category Strategy ............................................................................................................. 64 12 Category Tactics ............................................................................................................... 66 12.1 Assortment ............................................................................................................. 66 12.2 Display ................................................................................................................... 66 12.3 Price ........................................................................................................................ 68 12.4 Promotion ..............................................................................................................