[Image of: RetailWire Logo and Tagline (for print)]

BUSINESS TIPS

IRI:
Shopper-Centric Execution
ChannelAdvisor:
Online Selling Strategies
RR Donnelley:
In-Store Marketing
LoyaltyOne:
Enriching Customer Relationships
 
[11 comments]

RSR Research: Who Pushes Who? Vendors vs. Retailers

December 9, 2011

Through a special arrangement, presented here for discussion is a summary of an article from Retail Paradox, Retail Systems Research's weekly analysis on emerging issues facing retailers.

We were talking internally at RSR about some of the changes (or lack thereof) that we're seeing in the industry. One topic that came up: who pushes whom more when it comes to IT collaboration — vendors or retailers?

On the one side, retailers push vendors. At a panel on price optimization not too long ago, I asked the retailers on the panel: Have you maxed out the capabilities of the vendors you use for price optimization, or do you feel like there's a lot more that they provide that you haven't yet taken advantage of? The answers surprised me. Across the board, the retailers said, "We are constantly pushing our vendor to do more in price optimization. We have so many more ideas of what we want to do with it than what they are providing today." After the session, the vendors strongly disagreed with that assessment. "Those guys have barely scratched the surface of what we provide," one such vendor lamented. There's a huge difference in perception.

On the other side, vendors push retailers. For example, RSR sees omni-channel retailing as a transformational endeavor for the industry. In talking to vendors, we get a lot of angst on the issue. "We understand what needs to happen, but retailers aren't making the big changes they need to make!" Yet again, a huge difference in perception, though this one I can understand better. A retailer, mired in the practicality of the day-to-day, looks at a vendor knocking on their door and offering "transformation" and wants to just slam that door shut.

But here's the theme that emerges from these two gaps:

  • Vendors want to push retailers on strategy, because strategic changes mean big projects and long roadmaps and lots of implementation and change management.
  • Retailers want help with the tactics. They want the 10 features/functions done that would solve so many of their problems — if the vendor would just prioritize those 10 things and get them done. Unfortunately, they're competing with the vendor's other retail customers who all want their own (different) ten thing prioritized too.

They're both missing the point.

Vendors aren't going to get retailers to take them seriously on the big transformation vision until vendors deliver on the tactics. How much credibility can vendors have in driving the big things when they're allowing the small things to fester?

And retailers are never going to be able to move beyond tactical changes until they start thinking strategically about their vendor partners. They need to start thinking about how to most closely meld people-process-technology all together, rather than blindly insisting that the system change because the process demands it.

We seem doomed to stay in this cycle until someone actually uses information technology transformatively. I haven't seen anyone do it yet. So round and round we go.

Discussion Questions:

Discussion Questions: How do conflicting priorities between retailers and vendors hinder collaboration on retail IT initiatives? Which side has more clout in driving such collaboration?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

To what degree do retailers generally engage strategically on IT technology with their vendors?

Comments:

No question, she/he who holds the checkbook holds the clout, however, both sides need to drive mutual focus and delivery of promised function and benefits. A common theme in cases where retailers and technology solution providers do work together well, is a focus on specific value creation, accountability on both sides, and a commitment to a partnership approach. So long as the term "buyer" and "vendor" are used, and the though processes behind those terms, little will change.

[Image of: View Braintrust Panelist button]
Verlin Youd, Principal, VPY LLC

This "who is pushing who" argument is indicative of a fundamental flaw in the all-too-common vendor-retailer relationship. Stop "pushing." Stop digging in your heels. Adopt the "agile methodology" and make the interaction with your vendor/customer, the driving force behind every decision. A good relationship is not just important, it is the "medium," the guarantor of a successful outcome. These are not just words, this is the guiding principle behind a methodology that is now used by the world's largest software companies to develop successful and usable software. Working closely with your customers is not limited to software but can and should be the guiding principle behind all retailer-vendor relationships.

Fabien Tiburce, CEO, Compliantia, Retail Audit & Task Management Software

Vendors vs Retailers. Democrats vs Republicans. Rich vs Poor. This seems to be how America "works." It's always the other who needs to change. Frankly it's one huge collective death wish. All our problems stem from self-inflicted wounds.

We can't seem to break the old Newtonian mindset that the world is a collection of competing parts. When will we realize that we can have more prosperity, health, opportunity, meaning, passion, innovation, etc., than we've ever imagined possible simply by focusing on the alignment of energy. The universe is ONE thing, one integrated whole. So are our lives and our businesses.

On the top of my bucket list is the belief that someday I'll work with corporation who actually understands this. In my estimation less than 1% of corporations have a clue about their real possibilities...if they'd simply change their thinking. Align energy toward your highest possibilities and a whole new world opens up.

[Image of: View Braintrust Panelist button]
Ian Percy, President, The Ian Percy Corporation

The tier 1 brand vendor can drive change due to their financial and vendor position. Brand vendors offer the products, services and experiences people want to buy. The retailers are focused on operational and logistically challenges of getting vendor products and services to the shelves. In this environment of digitally empowered consumers, brands can, will, and already have established go-to-market strategies and road maps that will allow them to establish direct communication and sales to their customers -- marginalizing the retailer to simply a 'touch n' feel' showroom. Brands may have more clout but retailers have more to lose if their IT initiatives are not driven by consumer and marketing realities.

[Image of: View Braintrust Panelist button]
Adrian Weidmann, Principal, StoreStream Metrics, LLC

The Holy Grail in the successful transformation of retail applications is a new paradigm in retail item data master files. Instead of a static model that simply indexes item numbers to a single description, the item master data must be recorded in a dynamic model that supports "perspectives" and "views" of the retailer's master data. Perspectives are used by various functional areas to link equivalent items based on purpose. The item perspective for replenishment, stock ledger accounting, merchandising, and price optimization could each consist of a different combination of physical units (straight, pre-priced, cents-off, downsized, upsized etc.) of the same "item." And each of these functional areas could require different views or set of attributes regarding the perspective they have taken.

But this is the challenge. It is kind of like trying to set a great dinner table without enlarging the table. You can have great silverware, glassware, and dishes but if you don't have the foundation upon which to place them you are not going to be successful.

The great thing is that getting from here to there is really not that difficult. Once the need to change the underlying data model is accepted, it becomes merely a back end change of the IT systems to implement it. All the old applications (dinnerware) can continue to be used on the new data model (table). This means training of users is minimal and disruptions in the operation should be minor. Once the table is place, the retailer can begin changing the dinnerware one piece at a time.

[Image of: View Braintrust Panelist button]
Bill Bittner, Principal, BWH Consulting

Price optimization isn't a static "thing," it is a moving target as the "omni" in omni-channel accelerates and as globalization, localization and price transparency get thrown into the mix. The dirty secret, I think, is that retailers are appropriately freaked out by the challenge and vendors, by and large, do not have the vision or desire to drive big picture solutions beyond their self-interest.

[Image of: View Braintrust Panelist button]
Carol Spieckerman, President, newmarketbuilders

In my business their is very little trust between certain large vendors anymore. I've said it here numerous times, and until we can work together on competitive pricing, we will continue to struggle for growth. I'm open for suggestions on how to make this better, but it is unlikely we will see anything resembling fairness now, or in the future from many of the main CPG companies.

Collaboration is a great idea, but it is a difficult process to achieve.

[Image of: View Braintrust Panelist button]
Tony Orlando, Owner, Tony O's Supermarket & Catering

I find all of this discussion very much on target, and at the same time, strangely unsatisfying. The retailer/supplier/advisor relationship is simply dysfunctional, a condition which has been transcended to an extent here and there.

If we add the shopper to other three, we find even more dysfunction. But it all makes perfect sense, and each party is behaving in a mostly rational manner, given each party's focus on the immediate satisfaction of their own needs.

For the retailer, that is to build neighborhood "warehouses" where they stock shelves/displays selected from the million items available from the suppliers, and seek rent for this operation from the suppliers.

Suppliers are really only interested in their own brands and merchandise on the few aisles where it appears, but know that they MUST feign interest in the entire category to engage the retailer. Paying retailers for the "privilege" of playing is not just baksheesh, it is the foundation of retailer profits.

The shopper is largely unaware of the true business going on in these emporia, even though they fund it through their purchases. Self-service literally means that they have learned how to service themselves quite adequately, although far less than optimally.

Retailers, brand suppliers, nor shoppers, understand the actual behavior of shoppers in the store, other than cataloging both shoppers and products and what they cart out of the stores, and the money they leave at the checkout.

[Image of: View Braintrust Panelist button]
Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Shopper Scientist LLC

Herb Sorensen describes the "relationship" between suppliers and retailers very aptly...one of dysfunction. Despite decades of hand shaking, cooperation on studies and broad based initiatives, both suppler and retailer remain mired in their own tactical issues mostly pertaining to driving "short term" sales. There are exceptions on both sides of the industry. Some very successful retailers that operate from a legitimate strategic platform, and brands and technology companies that understand they win, when the retailer wins. But these examples are the exceptions.

There is a glimmer of hope. There are itches that do need to be scratched. Brands need more data that many retailers have, and are under-utilizing. Retailers need more content for their web, mobile and frequent shopper initiatives. I would like to think that there's a quid pro quo formula out there somewhere that begins to change the short-term thinking paradigm. Retailers need to be more receptive to data exchanges with the proper conditions. Brands and technology companies need to devise actionable applications from the use of the data that apply to the retailer's broader needs, not just focused on the needs of the brand or technology.

While this is not "rocket science," it does involve a bit of "brain surgery" as it requires some fundamental changes in the way vendors and retailers think. I'm getting older by the day; let's get started!

[Image of: View Braintrust Panelist button]
Mark Heckman, Principal, Mark Heckman Consulting

This is ignoring the golden rule: "He who has the gold makes the rules." The retailers have the gold, and make the rules. The retailers have more clout. They decide what to buy, when to purchase it, and how much to pay. Suppliers always have to conform to the retailer's requirements, not the other way around. This is why the golden rule survives....

[Image of: View Braintrust Panelist button]
Kai Clarke, CEO, American Retail Consultants

Nothing has changed between vendor and retailer. Retailers want lower prices and vendors want retailers to buy/sell more product. We have been through ECR, category management and many attempts at collaboration yet anyone can identify the vendor who prepared the plan-o-gram. All the while, e-commerce continues to increase sales at the expense of brick & mortar. Vendors understand the issue from their perspective, but their solutions don't always work. Maybe it is time to stop trying to solve all the retail world problems and instead, focus on real problems such as Out-Of-Stocks.

[Image of: View Braintrust Panelist button]
W. Frank Dell II, CMC, President, Dellmart & Company

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters