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New Liaisons Not Necessarily Dangerous

June 4, 2009

By Bernice Hurst, Contributing Editor, RetailWire

Finding ways to maximize staff, facilities and technology by sharing them with competitors may be the new Dangerous Liaisons. According to a report in The Times, U.K. manufacturers and retailers are looking at creative ways to use what they have - or what someone else has - to mutual and cost-effective advantage. Fair, objective contracts can often reduce some of the expense, stress and chores needed to sustain in-house activities.

As the paper explains, "with mergers off the cards for all but the most cash-rich companies and the pressing need to make savings, companies are looking to less permanent liaisons that can bring mutual gain." Andy Tinlin of Accenture is quoted as saying,"Collaborative ventures are being seen very much as an alternative to M&A."

Explaining that shared functions such as procurement can provide synergy, Mr. Tinlin went on to describe "a fundamental shift from doing it all yourself to focusing on the customer proposition, brand and relationships."

Similarly, Stuart McKee of PricewaterhouseCoopers (PwC) contends, "Every business has some part on which it could collaborate...with a competitor." Although there are obvious challenges involved, especially avoiding disclosure of commercially sensitive information, PwC is so sure of its potential that it has created "prepack contracts" to cover the legalities for joint ventures.

One organization actively putting cooperation into practice is the Institute of Grocery Distribution (IGD) which has been playing matchmaker to retailers since 2006, specifically in terms of transport and distribution routes. A series of sponsored events has helped companies swap details of routes and look for opportunities to share transport. Tarun Patel, head of IGD's supply chain division, said they wanted to help reduce wasted time and energy from vehicles returning empty from their destinations. He cites Tesco and Unilever as an example, pointing out that they were sending empty trucks in opposite directions between two specific points. They now share.

Mr. Patel goes on to say that collaboration has enough benefits to outweigh concerns about secrecy especially when companies realize that they are saving both money and miles. Environmental savings can provide advantages to business as well as brownie points with customers.

Discussion questions: Are retailers ready to look at collaboration for cost-saving or environmental reasons? What areas do you think may be non-competitive enough for retailers to share resources?

Liaisons with rivals look less dangerous - The (London) Times

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Comments:

One area where retailers can collaborate without worrying about secrecy is the area of factory audits for social compliance, i.e., for things like child labor, working hours, etc. Most of the retailers' "Code of Conduct" are pretty much similar. Therefore, instead of every retailer sending in their own auditors, it would pay to send in one auditor and share the audit results. Also, in case a factory is certified by a given retailer, it would be wise for another retailer to accept that certification and not conduct an audit of that factory.

Pradip V. Mehta, P.E., Principal, Mehta Consulting, LLC

Key to the success of resource sharing will be retailers becoming more open to looking at each other as having shared objectives, as being teammates as well as competitors. With the wealth of information gathering services, stimulated by the interactive capabilities of Web 2.0, there are progressively fewer trade secrets to be protected by avoiding collaborative arrangements.

However, based on what I've seen happen to other information sharing initiatives, my guess is that as the economy improves, retailers will again become more protective, so the resource sharing will decrease.

Bruce D. Sanders, Ph.D., Consulting Psychologist, Assessment Resources

I'm a simple guy who needs visual aids or, at least, a real example or case history to help me understand. Otherwise, premises such as this are about as real as a Mideast Peace Accord. Was this report referring to examples such as the following?: U.S. retailers cooperate with each other, such as working through a trucking intermediary to share delivery and backhaul services. National brand manufacturers that produce DSD products both branded and store-labeled will deliver both to stores on the same truck. Back in Pittsburgh, our chain rented frozen food storage from a competitor. Here in NorCal, competitors Raley's and Save Mart share a warehouse and several private labels. Perhaps these are the types of collaboration this report suggests. Who knows?

Another way to view this concept is vertically rather than horizontally. Why limit collaboration strictly to competitors? How can different categories of retailers collaborate without fear of sharing proprietary secrets? How can a department store chain share services and knowledge with a supermarket chain? If this concept is to go anywhere, broader opportunities require review.

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M. Jericho Banks PhD, President, CEO, Forensic Marketing LLC

Retailers who pool their buying via co-ops like Retex already help each other. Retailers who bargain with unions as a united front help each other. Bookstores who lease space to coffee restaurant operators help themselves and the food service folks. Business owners who actively participate in local chambers of commerce and downtown business associations help each other. The smartest retailers refrain from ruinous price competition and ruinous real estate competition.

Mark Lilien, Consultant, Retail Technology Group

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