Micro markets are changing the face of the vending industry. They are transforming the way vending operators serve their customers. However, at the most basic level, a micro market is closer to a retail or traditional convenience store environment rather than vending, meaning it will benefit from the retail concept of category management.
Category management means analyzing a specific category, like salty snacks or confections, as a strategic business unit, which is then evaluated with its own turnover and profitability targets as though it were its own mini business. It involves analyzing SKU by SKU information, brands and product groupings. "The ultimate goal is to customize categories to satisfy consumer needs," said Kelly Fulford, senior category development manager at General Mills. "It’s important because it helps micro markets and manufacturers expand their consumer reach and is a key driver of sales and profitability"
Using category management, operators can partner with suppliers to drive sales. Instead of a suppliers' promotion or product cannibalizing sales from a similar product, using category management, the supplier helps the operator increase the sales of the entire category as a whole.
Define product sets
The first step to using category management is to recognize product sets, defined as a group of similar items such as single-serve products. Or, a more specific set would be salted snacks. "Sets vary based on the size of the micro mart and the location of the store," said Fulford. "We recommend having representation across key sets that will offer the consumer solutions throughout the day."
Beverages and snacks for immediate consumption are important sets in micro markets, but there are others. "Whenever possible there should also be a selection of health and beauty aid solutions," said Fulford. "For larger micro marts we are also seeing larger take-home products to fulfill the important fill-in type trip. These types of sets include standard grocery items like box cereal, dry packaged dinners, condiments, soups, in addition to frozen dinners, pizzas and appetizers."
One important aspect when considering products for the micro market is that items shouldn't be the same size as vending products. "The packages should be larger -- closer to the size sold in traditional c-stores since that's what the customer is expecting," said Fulford. "A vending size really isn't meeting the customers' expectation."
Place by need state and day part
Another important consideration in driving sales with category management is product placement. Operators need to consider the consumers' 'need state' or frame of mind at the time of purchase. Is the consumer looking for a snack or a meal replacement? This is closely related to 'day-part' or what time of day the purchase is being made. Using the two together allows operators to create a more effective planogram for the market. For example, cup cereal, granola bars, pastries, pop-tarts, breakfast bars and nutrition/energy bars can be grouped together to make-up a morning day-part and meet the breakfast need state.
"This not only makes it easier for the consumer to find what they are looking for, but it also helps increase the overall basket [or number of products the consumer will buy]," said Fulford. And suppliers can often help. "We have worked closely with operators including Vistar where we worked collaboratively with other manufacturers to develop best practice planograms designed exclusively for micro markets." Fulford added.
Utilize product data
Finally, vending operators should use their sales data and/or partner with the supplier to determine their best sellers and ones they might be missing. "We analyze multiple geographies including the total U.S., the competitive market, and scan data from micro markets," said Fulford. "From there, we can quickly determine if there are any gaps of core products. These are the SKUs that are the highest performing, highest turning SKUs in the category [and] drive two times the sales -- and four times the profit."
Because traditional vending product selection and placement are driven by price and size, category management has been limited at the machine level. However, in formats like micro markets, operators can use the successful retail concept category management to greater effect, and profits.