The Future of Category Management: Harnessing the Power of Generative AI & Natural Language Models (NLM)
The term "category management" was introduced by Brian F. Harris, a former professor at the University of Southern California and the founder of The Partnering Group (TPG). This approach, which aims to optimize the sales and profitability of each product category, has been a cornerstone of the retail industry since the late 1980s. Technologies like Apollo Space Management, developed by Harris, revolutionized the industry, giving us "superpowers" that transformed our capabilities.
However, the landscape of category management is changing, and the next revolution is on the horizon. The advent of generative AI and natural language models is set to redefine our collaboration and application of expertise.
McKinsey's report reveals that tasks previously deemed unsuitable for automation, such as applying expertise and collaboration between humans and systems, are now possible. The report highlights that applying expertise as a "task" could result in a productivity gain of close to 1.8X or an impressive 87.5% and the ability to enhance collaboration by a factor of 2.36X or 136%, effectively generating 2X on current industry capabilities.
One company at the forefront of this revolution is HIVERY, a pioneer of next-generation hyper-local retail assortment strategy simulation and optimization solutions. HIVERY's AI-powered analytics transform consumer packaged goods (CPG) manufacturers' and retailers' validation and collaboration on assortment and space decisions. By leveraging advanced machine learning and operations research techniques, HIVERY can make recommendations based on existing data, offering rapid scenario planning and space and assortment optimization at a store level.
HIVERY's AI uncovers latent shopper insights and gains industry recognition by turning store-level data into actionable insights. For instance, HIVERY's AI can pinpoint the 33 out of 400 stores that could drive over a 15% incremental sales increase, demonstrating the power of AI in refining store cluster design. This is the white space that HIVERY sees, and it's where the next revolution in category management is happening.
What is is striking about leveraging this technology is the speed. CPG manufacturers and retailers alike are able rapidly ask strategic questions and get response to questions like:
- How do I maximize the opportunity of my existing portfolio?
- How do I maximize the opportunity of my existing portfolio per retailer?
- What is the ideal cluster size?
- What is the impact of demand transfer across the portfolio?
- What is the prediction for how my new items will perform?
- What is the predicted impact to the store/item if price changes occur?
This "applied expertise" and opportunity to collaborate quickly provides a more dynamic approach to portfolio, assortment and space planning.
The future of category management lies in the intersection of AI and retail strategy. As we progress, the ability to harness the power of generative AI will become increasingly important. The potential for productivity gains is immense, and companies like HIVERY are leading the way in realizing this potential. As we continue to explore this new frontier, the possibilities for innovation and growth are limitless.