A Retail Leader Unlocks the Power of Scale
A new merchandising model boosted a retailer’s top and bottom-line.
A large national retailer struggled to make the most of its significant scale. Built by acquisitions, RetailCo* made merchandising decisions such as category assortment, promotions, and pricing locally. While this helped the company retain local relevance, it prevented RetailCo from realizing the cost benefits of scale supplier relationships, hindering its ability to be price competitive and thereby drive profitable growth.
RetailCo enlisted us to help design, pilot, and rapidly scale a new merchandising model. Past efforts to integrate had fallen short, and doubts about trade-offs lingered. This skepticism made our challenge clear: Prove that RetailCo doesn’t have to sacrifice local relevance to benefit from its national scale.
Working closely with a steering committee featuring national and business unit executives, we established a set of strategic principles and management behaviors. Starting with best-in-class approaches to customer-led category management, we then tailored our approach to RetailCo’s values and operating model, using insights from in-depth workshops with a cross-functional group of leaders.
RetailCo’s new end-to-end category management process was data driven and customer centric. A consistent set of category management analytics, including all-in supplier profitability, allowed the company to begin supplier negotiations with one voice to generate category growth, lower costs, and unlock supplier investment. Customer metrics such as SKU-level loyalty and substitutability instilled confidence that any shifts to category strategy and assortment would resonate with customers.
Continuous improvement was a key element of the model. We designed and deployed in tandem, test-driving new approaches to iteratively refine the approach and extend it to new categories. This, paired with a clear investment in change management from day one, allowed us to build momentum with early wins.
With a clearly defined merchandising model in place, RetailCo needed the network to support it. We helped the company install and onboard new national merchants, advance its tools for both category management and value tracking, and leverage data to conduct supplier negotiations more effectively. As we continued to mature the model, we integrated other functional areas—for instance, private label, replenishment, and supply chain—to ensure that we had the appropriate cross-functional partnerships in place.
RetailCo’s coordinated approach removed unnecessary complexity, allowing the company to bring deeper category knowledge and functional expertise to merchandising decisions and supplier negotiations—and without forfeiting local market expertise. Supported by powerful data, the model helped RetailCo make better, faster decisions with confidence; partner better with suppliers for deeper investment in growth; and be competitive on price where it counted.
Strong results followed: Sales in categories managed under the new merchandising model outperformed comparable categories by more than 100 basis points. Additionally, RetailCo saw a more than 5% increase in supplier investment in cost of goods—savings that were reinvested back into the business. In addition to boosting bargaining power, RetailCo saw longer-term gains, including an upskilled merchant team, data that offered a single source of truth, and a commitment to ongoing category innovation. Ultimately, the transformation proved that the company didn’t need to balance local relevance and national scale when it could win at both.