The evolving nature of category leadership

Is there a change in the air when it comes to category leadership? In the past, when I would go country-to-country, clients would complain when I would show examples from outside of their region or country. They might say, “our country is different”.  Alternatively, they would say, “That’s interesting but it will not play out in the same way here.”

Recently, that story has changed. When I show examples of in-store best practices I get the question “That’s a great example but is that brand doing all the right things in highly developed eCommerce markets?”

The implication is that to be a ‘best practice’ category leader in 2018 you need to be doing three things right:

1. In-store category leadership
2. Digital category leadership
3. Leadership in countries where ecommerce is highly developed

Let’s consider points two and three specifically.

Digital category leadership

Believe it or not, digital retailing is now well over 20 years old. Amazon got its start in 1994 and had its IPO in 1997. Alibaba got underway not long after with a start in 1999 and IPOd in 2014. eBay was founded in 1995 and went public in 1998. Because of this ‘long history’ we can say two things about digital category leadership:

1. The foundational principles of what to do and how it works differently from in-store category leadership are well established and well-practiced
2. New principles and modifications occur when platforms get upgraded and new devices are created such as smart entertainment devices (Amazon Echo, Google Home, etc.)

The result is a digital category leadership playbook that has foundational principles at its core, a set of more advanced skills on the edges, and true innovation in pockets of invention.  There are several ways to describe this phenomenon but the one we use at Kantar Consulting is ‘Fix, Build, Impact.’ 

How do these principles differ from their real-world equivalents?

• Fix. In-store category leadership starts with the principle that not all positions on a shelf are equal. Eye-level positions, positions on the ends of aisles, and special ‘call outs’ all help a brand and a category come to life in new ways. The foundation of in-store category leadership is physical space. Digital is different. The challenge in digital is replication, multiplication and versioning. If you put one product image up on a website, other websites and individuals can copy and reference the image. Even when a brand is good at re-versioning images and product names copies can get made, mistakes can go ‘viral’, and links can multiply.  For this reason, in-store retail is about winning more space or getting the best position in a space while digital retailing is about fixing or minimising the copies and versions that go beyond a brand’s control. Good brands constantly ‘fix’ their digital personas by implementing rules and processes around image compliance, product title compliance, description compliance, and price/promotion.

• Build. In-store category leadership often means managing more positions in-store than the primary shelf placement. Good in-store category leaders work hard to get secondary placements, category extensions, and adjacent category placements that help build basket.  For digital retailing, this is different.  Digital category leadership is less about building MORE placements and it is more about LOCKING IN one placement and making the purchase routine.  Good in-store category leaders get their products put in more corners of the store.  Good digital category leaders get consumers to lock in on favourites or auto-refill, thereby eliminating the need to have multiple locations on a website or shopping app.  Excellent digital brand leaders constantly manage their ‘Share of Favourites’, ‘Share of Search’, create calculations on usage patterns and set reminders for when a family may be running low, and other such approaches.

• Impact. In-store category leadership typically relies on the notion of ‘from marketing to shelf’ where the above-the-line marketing is aligned to the in-store/POS materials.  Digital category leadership is somewhat the opposite, where great digital category leaders are able to identify individuals who do not fit the ‘above the line’ stereotype or target audience and can thereby retarget the person/individual.  If instore category leadership is about consistency between mass market communication and POP communication, digital is the opposite where success lies in retargeting individuals that do not respond positively to the mass market message.  The most advanced digital brand leaders spend more time thinking about how to create multiple messages as compared to trying to link a single message across all touch points. 

Leadership in highly developed eCountries

Digital retailing is not developing at a uniform pace around the world.  For this reason, particularly in CPG categories, we see pockets of high and low development even within countries. However, six countries stand out for having several unique factors that make them benchmarks for any company looking to develop best practices in ‘Total Category Leadership’. Let me list my six with a brief explanation.

1. South Korea. South Koreans were blessed with having Samsung as one of their best success stories.  As a result, most South Koreans have been shopping on mobile phones for many years.  Many CPG categories now have higher online share than offline share.
2. China. The Chinese Mainland has seen eCommerce thrive with a variety of innovations that could only happen in a country where the government actively encouraged and sometimes supported invention.  Today China stands at the top of a big mountain when it comes digital category leadership.  Most CPG companies in China today have teams that only know how to do digital category leadership and do not know the first things about in-store category leadership.
3. The UK. British retailers have successfully convinced many households to do bulk shopping with home delivery online and have perfected the auto-replenish nature of digital shopping excellence.
4. France. French drives, which have limited assortment as a unique feature unlike most forms of digital retailing which have ‘endless aisle assortments’, do the best job of managing bestselling SKUs and fast-turn around orders in the world.
5. US. My colleague, Bryan Gildenberg, often states that if you were to measure the purchasing power of America’s Amazon Prime Nation – the Americans who have purchased an Amazon Prime membership – they would rank among the top countries in the world in terms of annual retail spend. There should be little doubt that more money and more resources are going into digital category leadership in the USA than any other country in the world.
6. Japan. Japan’s unique combination of walk-up retailing (convenience stores and pharmacies) and high-tech culture make it a country where innovation thrives and great category leaders emerge.

Implications for brands

Brands looking to be true ‘category leaders’ need to begin building a ‘change or die’ mentality to their category leadership playbooks. Retailers are finding ways to connect the physical and digital world of retail in surprising ways. This will require brands to follow the three steps to success: 

1. Educate category leaders on the principles of in-store success
2. Develop ‘fix-build-impact’ plans in digital commerce
3. Spend time getting to know what comes next by looking at South Korea, China, UK, France, USA and Japan.

Ray Gaul is VP Research & Analytics, Market Insights at Kantar Consulting, with a speciality in retail marketplace trends, global retailer analysis, economic modelling and forecasting.