Borders's new category management program is an unqualified success in the areas where it has been fully implemented, chairman and CEO Greg Josefowicz said in a conference call with analysts about the company's first quarter results. The program, underwritten by publishers, provides a "more formal framework" for Borders's suppliers to act as "trading partners," he added.
The heart of the program is to team Borders with publishers for the purpose of conducting research, Michael Spinozzi, executive v-p, chief marketing officer, told PW. In these partnerships, the publisher will be called the "lead supplier," though Borders retains all buying functions, especially the final say on what books to buy and where to place them.
Category management "creates an environment where we can avail ourselves" of a wide range of information, said Josefowicz. Publisher input will include advising on pricing, space and display, as well as title selection. Research is conducted using focus groups, exit interviews and various polling methods. Borders estimates it will take a year and a half to roll out the program for all categories.
Though new to publishing, category management is a common practice in other types of retail and is most common to department stores such as Target. The program used by Borders is a seven-step process that evaluates a single item within the overall product mix. A single category evaluation takes between 15 and 20 weeks to conduct. In addition to the books department, category management is also being applied to the music department, videos and the Borders cafe.
So far the program has been applied to three book categories: cooking and romance (both underwritten by HarperCollins) and a part of the children's department (underwritten by Random House). Approximately 250 distinct categories have been identified within a typical Borders store. So far, 800 Borders and publishing personnel have gone through the two-day training session, which is primarily conducted at Borders headquarters in Ann Arbor, Mich., by an outside supplier.
Spinozzi confirmed that publishers pay fees to underwrite the research, though these are "flexible, depending on the size of the project." In the case of HarperCollins and Random House, the investment was significant and estimated at more than $100,000 for each category. Spinozzi added that "as research accumulates, the cost will go down or disappear altogether." Publishing partners are evaluated on their "capability to deliver consumer research" and this is "not pursuant to their size," he continued. Small publishers, in particular, will be invited to become lead suppliers in categories for which they have a niche specialty.
Test Findings
Sales of cookbooks increased by double-digit rates in the first quarter, Josefowicz said, in large part because the company applied research that revealed that 30% of cookbook customers bought 80% of the titles and about a quarter of the cookbooks bought were given as gifts. The typical cookbook customer shops between one and four times per year for new books and hence doesn't drive new traffic, so location is a lower priority than it would be for new fiction, for example.
Spinozzi said that among the problems the research identified was that cookbooks vary in degree of difficulty and that in the past, Borders had typically stocked as many as a dozen books on a single topic. "We found that was too many," he said. "What we discovered was that, say with a sushi cookbook, we needed only five or six titles, all faced out, and they should be divided equally for three distinct skill levels—beginner, intermediate and experts."
In another example, research into the children's category showed that books for beginning readers catered to three distinct phases: when the parent reads to the child, when the child and parent read together, when the child reads alone. "We can now apply this research to determine a better way to shelve these books," said Spinozzi.
While some of this information may be familiar to experienced independent booksellers, hard data is what often determines decisions in large corporations. Spinozzi characterized its value thusly: "Our investment in this has been considerable. We want this to be a bold program. The research has to be meaningful to customers. It has the potential to significantly improve the way we do business."
