Source | Innovation Retail Society China's retail industry is currently in an unprecedented wave of "adjustment fever." Starting with Pangdonglai's adjustments to Bubugao and Yonghui, supermarket owners across the country seem to have grabbed a lifeline in their darkest hour. They travel in groups to Xuchang and Zhengzhou to learn display techniques and introduce internet-famous products, attempting to reverse declining performance through a facelift. However, after an in-depth exchange with Zhang Zhiqiang, known as "China's No. 1 in Category Management," my biggest takeaway is: if you cannot see through the underlying logic behind the adjustments, simply making "patchwork" fixes at the tactical level will not save retailers. Zhang Zhiqiang, in deep collaboration with Dr. Brian Harris, the "Father of Category Management," co-authored the book "Category Management" tailored for the Chinese market. The current hot "adjustment" is just the shell—he shared his thoughts starting from the fundamentals of retail: category management. The following is the core essence of our deep exchange, shared with every anxious retail professional and upstream supplier friend.

The "Adjustment Fever" Is Essentially a Delayed "Make-Up Lesson"

In the fervent wave of adjustments, we first need to think calmly: Why is everyone talking about adjustments now?

  1. Adjustments should be the norm, not a last-minute rescue Zhang Zhiqiang pointed out that store adjustments are originally routine work that retail enterprises should do regularly. It should not be a phased "blitz" but a continuous self-correction. If we look at international retail giants like Walmart, Aldi, or Costco, their store displays and product assortments today are vastly different from ten years ago. That's because true retail masters are constantly adjusting based on market feedback. However, in the past two to three decades, domestic retail has been in a period of incremental dividends, making money relatively easy, and this work has been greatly neglected. This "passive waiting" dragged on until today, when pressure is immense, and Pangdonglai acted as a trigger, elevating what should be normal basic operations to the level of a "lifeline."
  2. The current adjustments are essentially a delayed make-up lesson Mr. Zhang gave a very blunt assessment: China's overall retail level lags behind the United States by about 30 years. The U.S. retail industry entered a stage of oversupply and saturation in the early 1990s, and by then, category management was already widely adopted. In contrast, Chinese retail only truly hit the saturation red line around 2016. In the past, we were accustomed to collecting channel fees and relying on real estate dividends, but we forgot that the core skill of retail is "managing products." This means that our current adjustment fever is essentially a make-up lesson for the basic skills that others mastered 30 years ago. But if domestic local enterprises only engage in campaign-style adjustments without building their own systematic capabilities, it will be difficult to survive in an era of oversupply.

Adjustments Are Not About Copying;

Current Retail Operations Must Grasp Three Variables

Many companies' current adjustment practices are extremely simplistic and dangerous: changing displays, cutting slow-moving items, and blindly competing on low prices. Some even set their benchmark on a single model, directly copying Pangdonglai's product list. Mr. Zhang pointed out: "You cannot simply imitate a successful company because the scenarios and consumer groups have changed." A truly complete adjustment must penetrate the surface and grasp the deep changes in the following three key variables:

  1. Structural generational differences among consumers Many supermarkets opened 20 to 30 years ago, serving young people around 30 at the time. Now, this main customer base has entered their 50s, and their consumption habits, family structures, and health needs have undergone qualitative changes. If you still follow the old logic, no matter how beautiful the displays, you cannot attract the new generation of young people, nor retain the aging old customers. The starting point of adjustment is not the shelf but a re-understanding of "people."
  2. Dimensional reduction in the competitive landscape In the past, there were not enough supermarkets, so opening a store meant traffic; now, there is severe oversupply. Besides competition from peers, instant retail and discount stores are vying for customers' limited spending power. This requires adjustments to have precise differentiation goals, not just vague "improvement." You need to think: With the impact of instant retail's 30-minute delivery, why should customers still come to your store?
  3. Management dividends from new technology If in the past store adjustments could rely on the boss's "ideas" and "inspiration," in the future, they must rely on algorithms. Big data and AI have already provided precise forecasting tools for retail. If adjustments do not apply information technology for refined management, it will be impossible to identify true demand growth points from massive data.

The Core of Category Management:

Selling the Right Products Matters More Than Buying Cheap

Many retailers fall into the low-price trap during adjustments. But Mr. Zhang reminded: "Selling the right products is much more important than buying cheap." This is the core of category management thinking. What is a category? A category is a group of products that corresponds to a certain customer need, reclassified from the perspective of how customers perceive the store. For example, traditional management classifies categories by product attributes (e.g., fruit canned goods and meat canned goods are both called "canned goods"), which is a supply-side view. But from the customer's perspective, fruit canned goods should be closer to snacks, while meat canned goods are closer to main dishes. Therefore, in category management, in terms of display, fruit canned goods should be near the snack area, and meat canned goods near the deli area. Price is very important, but it is just one dimension. Category management supports adjustments through four specific tasks:

Assortment: Finding the optimal combination that satisfies customers and benefits the enterprise.

Pricing: Not just low prices, but establishing a good price image while ensuring profits.

Promotion: Not just selling more, but amplifying the store's strengths to attract repeat customers.

Display: Making it easy for customers to find products while subtly guiding sales of high-margin and private-label items. Why do category management? Because of choice overload, you need to give customers a reason to enter the store and make purchases. So, the starting point of category management is the customer. To do it well, you must shift from a supply-side view to a customer view. Mr. Zhang shared a practical data point: A store reduced its SKUs from 100 to 60 during adjustment. Surprisingly, sales increased, profits rose, inventory turned faster, and most importantly, customers felt the assortment was richer. This is because category management eliminated ineffective redundant items, leaving a combination that truly meets needs.

Upstream Suppliers Must Keep Up with "Category Management"

Many mistakenly believe that category management is just retailers adjusting displays and cutting products behind closed doors. In fact, it is a process of jointly reconstructing the value chain between retailers and upstream suppliers. In an era of severe store oversupply, retailers are undergoing forced reform from "collecting channel fees" to "managing products." If suppliers do not deeply participate in category adjustments, they can easily be ruthlessly eliminated in the first round of SKU reshuffling. Looking at historical lessons, U.S. retail entered a saturation and oversupply period in the 1990s. At that time, not only retailers actively embraced category management, but also top brand manufacturers like Coca-Cola and Procter & Gamble (P&G). They keenly sensed that the industry chain logic had shifted from factory-led "PUSH" to consumer-driven "PULL." P&G decisively restructured its organization from brand teams to a "category" focus, precisely to form a close "super club" collaboration with retailers, turning transactional games into symbiotic growth. For the current Chinese market, brand manufacturers must complete a transformation from "sellers" to "strategic partners." Precise R&D: Deeply understand the category roles at the retail end, no longer blindly pursuing single hit products, but developing products that fill category gaps and meet specific scenario needs. Master the truth: Through deep collaboration, brand manufacturers can gain clearer insights into the competitive landscape at the terminal, seeing who is taking your customers and under what conditions. In the category management landscape, intermediaries cannot stand aside. Distributors must also change, from "porters" to "solution providers." Referring to mature markets in Europe and the U.S., professional wholesalers like Super Value have long taken on the responsibility of providing complete category solutions to retail customers. If you remain in the role of "porter" and "financier," your value space will narrow. Only when you can deliver "management solutions" rather than just "logistics boxes" can you find a new ecological niche in the trend of channel shortening.

Conclusion:

In the Era of Oversupply, Move Toward the C-End

As I have emphasized in my recent articles: We are not in a simple "stock era" but a severe "oversupply era." In this stage, demographics determine products, and demand determines supply. Retailers making patchwork adjustments and suppliers blindly pushing products are destined to be eliminated. The real way out is to "move toward the C-end." This requires retailers and FMCG manufacturers to shift from a supply-side view to a customer view, transforming the zero-supply relationship from game theory to symbiosis, and achieving a demand-driven "pull" transformation. From March 16-18, in Chengdu, at the 11th China FMCG Conference (CFC), we have specially set up a forum: "Changes in Zero-Supply Relations under Supermarket Adjustments." Zhang Zhiqiang will be present to share his重磅 insights on "Building the Systematic Ability to 'Sell the Right Products' through Category Management," dissecting how to rebuild growth momentum through basic operational skills in the era of oversupply. Retailers seeking a way out and upstream manufacturers anxious about the future should not miss it. See you in Chengdu in March.