The Office Times

Article: VOW - The new challenges of category management

“Categories are morphing quicker than ever before, so although catalogues are important, they only serve as a snapshot in the lifetime of a category,” says Andrew Stacey, Vendor and Product Management Director at EVO Group. (photo courtesy of VOW)

How are categories organised at VOW?
The whole channel is changing at a great pace which means that the categories are far more dynamic than ever before, while the differences between them are blurring. We divide categories into seven areas: Traditional, Paper, EOS, Technology, Furniture, Facilities Supplies and Specialist, which includes bespoke products. Traditional, Paper and EOS make up what we call our Core Categories and account for 80% of sales. The remaining four are referred to as Growth Categories.

Starting with your Core Categories, what is your strategy here?
Our strategy is based on protecting channel profitability as these categories as a whole are not growing. To say that Traditional is in decline is misleading because there are growth areas such as writing instruments and Viscom (Visual Communication products), which is up double digits. However, this growth is offset by declines in categories such as filing. This is not just the case at VOW, but across the UK market. Third party statistics for the UK show that filing products declined by 12% last year. We need to be careful not to lump growth sub-categories with core declining product groups. There are pockets of opportunity.

Why are writing instruments and Viscom still performing well?
Pens make a statement about personality, even in the digital age. Books and pads also act in a similar way and can be personalised using different colours and designs. They can be classed as fashion accessories, although not to the same extent as mobile phones or watches.
Viscom has been successful because of other factors, one of which is embracing new technology. This has been done, for example, through the growth of digital whiteboards. There is now debate as to whether to place Viscom in the Tech category rather than Traditional. It also has the benefit of higher margins compared to other traditional products.

What are the sales trends for paper and EOS?
Paper and EOS use has fallen through increased efficiency. The adoption of cloud technology and Managed Print Services (MPS) has facilitated this drop in consumption. MPS tends to bring more efficiency to the printing process, thus reducing demand for printer consumables and paper. Paper was previously declining by 10%, although this is now slowing. Securing volume is going to be more problematic in the future through mill closures and restrictions in supply. This trend will inevitability lead to price increases and this will further exacerbate a reduction in usage.
The printing market has also been going through a period of change that has resulted in significant declines in EOS. As mentioned, MPS has increased efficiency, while home printing, which was once seen as a saviour for the printing industry, has been reduced to a specialist market. Despite overall declines, there are exceptions such as Epson, which has an exceptionally innovative product range, and Samsung, thanks to its volume of products.

How are the Growth Categories performing?
Growth categories at VOW are split into four areas and we have a distinct strategy for each. Out of these, the channel has now woken up to the opportunity of growing is the Facilities Supplies (FS) category. At VOW we break out these product areas into Catering and Kitchen, Jan/San, Retail Point-of Sale & Security, Health & Safety Packaging and Premises & Maintenance Products. We have a strategy for each sub category and they are all at different stages of growth and development. VOW was the first company to coin the term Facilities Management, but we now prefer the heading Facilities Supplies. These products make up the bulk of Growth Categories and now represent over £50 million in sales.
Our first step into Facilities Supplies was with 750g jars of Nescafé in conjunction with Nestle a number of years back. We were the first wholesaler in the UK to sell coffee, and even internally it was viewed as a speculative venture. There was no expectation that today this SKU would be the second biggest seller in the whole assortment. Nestlé has become one of our largest suppliers and is tremendously committed to the channel.
Following our success in Catering, we then targeted Jan/San, which is a £2 billion market in the UK, even though we estimate that our channel represents just £50 million. This highlights the enormous potential for growth that could eventually replace declines in our Core products.

How do you source these products?
We buy 60% of cleaning products from manufacturers, compared to 95% from distribution only a few years ago. It is a peculiarity of the Facility Supplies category that a major part of my job is selling the company in order to convince suppliers of the potential in the channel. We estimate that there are 2000 cleaning products dealers in the UK with an average turnover of £1-2 million. This is an untapped market to develop alongside increasing sales of Facilities Supplies to our existing dealers. The VOW Green Light event in January saw strong interest from office products dealers in new categories as they look to reduce reliance on traditional products and improve margins. Along with Furniture, Facilities Supplies, and Jan/San in particular, will be our big ‘push’ area for 2016.

Why is furniture now a push area?
Many companies are renewing their offices for the first time since 2008 and this has led to growth of 20% in office furniture sales. Developments in ergonomic seating will also be an important growth area over the next five years.

What are the trends in the other categories?
Technology has seen massive growth in terms of volumes, but little in terms of sales. Margins are also thin as the internet drives prices down. One interesting category is for Specialist products, including promotional items. This currently represents 4% of our portfolio compared to only 2% five years ago.

Can you explain the process for bringing new products into the assortment?
It is imperative to carefully analyse data from third parties such as GfK and suppliers before bringing any new products into the portfolio. At VOW we treat suppliers as partners and work together with the aim of mutually increasing sales. They have in-depth knowledge of their particular field and undertake research to understand which products are in demand. Over the years we have found that forging strong relationships and tapping into the expertise of suppliers is the most productive strategy to manage the product assortment.  

How important are catalogues today?
Categories are morphing quicker than ever before, so although catalogues are important, they only serve as a snapshot in the lifetime of a category. For example, the Technology catalogue we launched at the beginning of 2016 contained over 200 products that had been superceded.

How is it possible to manage categories in such a quick changing environment?
In brief, you have to stay on top of market data, listen to the suppliers and then be able to react quickly to bring products in, sell them, and move on. It means that the job of category manager has never been more dynamic.

 

 



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