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[5 comments]

Can brokers reinvent themselves?

February 10, 2014

Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Refrigerated Buyer magazine.

Consolidation, centralized buying and technology have forced brokers (or sales and marketing agencies, if you prefer) to adapt repeatedly. New challenges include static sales, online ordering and pay-for-service restructuring.

According to broker veteran Don Stuart, former COO of Kantar Retail and now managing partner at Cadent Consulting Group, consolidation on the retailer front has brought less of a need for local contacts — a traditional profit center for brokers — due to centralized buying points. More manufacturers have integrated additional headquarters accounts under their direct responsibility.

In the past few years, brokers have also become "more than just in-store execution arms," said Stuart, who began his marketing career (at Pillsbury) in both frozen and refrigerated business units — traditionally strongholds for brokers. They are now expected to provide new, full-service shopper marketing and insight capabilities.

He explained, "The concept is account-customized and sometimes store-customized execution based upon shopper insights. This is part of the 'supermarket offer' by brokers, and retailers need to get the best insight whether it's from a broker, a manufacturer or other third party when it comes to driving total category sales and profitability."

Regular planning sessions by buyer group with the key brokers in advance of actually doing the work has proven to be particularly beneficial to both vendors and retailers.

Retailers need to treat brokers as "more than just the source of in-store labor, but rather as a true partner," he said. Aligning responsibilities, providing flexibility to meet objectives and avoiding conflicting demands from headquarters and the store-level retail are critical.

Mr. Stuart added, "Leveraging brokers at what they do best, in-store service, in a true partnership fashion can result in a win/win."

Over many years, however, broker compensation has shifted to a more pay-for-service model, due to both cost pressures on the manufacturer side along with a desire for enhanced retailer service. Added Mr. Stuart, "Unless brokers can truly measure the impact they are having on sales, the trend will be down."

Moreover, with projections of more modest or even static growth at brick & mortar, brokers will be increasingly challenged to add value to online commerce.

Said Mr. Stuart, "The question is: How can brokers continue to credibly expand their service offering to grow revenue in a static environment or better define the area in which they play with new products, new retail environments and new services?"

Discussion Questions:

What do you think is the biggest challenge brokers face in the years ahead? How will their roles change?

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:

Do you expect that brokers will become more or less essential to the retail/vendor partnership over the next three to five years?

Comments:

The need for local representation is alive and well for most chain drug, food, and even mass merchandisers, in particular, for HBC, OTC, and personal care items. In fact, local representation is needed now more than ever before.

As a business development consultant, and U.S. master broker, I would not be able to do a complete job for my client's brands without local representation in all the major footprints around the country. My retail partners demand it on many levels, in many ways.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

Like all channel participants, the challenge is to continually add value. True the environment has changed significantly. The noted disruptions in distribution require all players to go back to zero. In the case of brokers the noted local contacts are now minimized. However, these local contacts can be leveraged into local knowledge experts who can provide critical (and unique) perspectives on shoppers, retailers, and competitors.

In essence, the role of a broker, like the rest of marketing, will shift from simply selling to data analytics. The advantage the broker can provide is to translate the data into meaningful action plans.

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Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

I was recently in a meeting where the role of the broker was the topic of discussion for another retail industry. There is no question their role is undergoing change from feet on the street to more analysis and insight providers.

Historically brokers built a personal relationship with the buyer who then tended to trust the broker to provide good advice and information on their and other products. Today the retailer has more detailed internal and external sales information. What they may lack in the insights that can be gained from the in-depth analysis of that data.

Other traditional broker functions such as new item introduction, promotional information, etc., can be effectively done electronically. This may mean fewer frequent face to face meetings, but meetings that are more impactful.

Some of this change, from a business model that had a high personal interaction to one that is less reliant, is generational. Millennials are very comfortable in making personal and professional buying decisions based on information supplied to them electronically.

Will brokers go away? No, but there is no question their role will continue to evolve.

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Steve Montgomery, President, b2b Solutions, LLC

I think the biggest challenge is providing the "new value" being sought. If the sales person (broker OR direct) is simply there as a conduit of corporate information (promo deals, new items, coupon drop dates, etc.), then the value is minimal and can easily be replaced with electronic communication. However, the new value is in interpreting the huge quantity of data and making sense of it. The environment is now one of information overload (often contradictory, difficult to discern and interpret, slogging through the volume of information, etc.).

Changing from "SELLING" or "EXECUTION" to "CONSULTING" is where I see the need evolving to in the future. The retailers that are limiting broker engagement and exposure are doing it because they do not perceive they are rewarded for the time being spent in those meetings. When the broker provides value - there is time allocated to meeting and working together.

Don Stuart is right - what service expansion can be provided? My reply is in being advocates, consultants, and analytic resources that go beyond simple volumetric reports or the "Tried and True" analysis. Extending insights and actions is the new forum.

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David Zahn, Owner, ZAHN Consulting, LLC

The biggest threat to brokers is their buyer-centric and store-centric focus, but the smart ones will turn this into an advantage and evolve their thinking regarding the role of the store, just as smart retailers are attempting to do. Stores are a critical link in retailers' omni-channel strategies and thanks to retailers' expanding online marketplaces and site-to-store ramp-ups, individual stores will facilitate sales that transcend store-level inventory and category limitations.

Brokers would be wise to expand relationships into dotcom and to proactively discuss individual retailer's omni-channel goals, promotions, pricing strategies, etc. Small formats tie into this. How can brokers help retailers make small formats uber efficient, optimizing store-level assortments while facilitating sales for online-unique items?

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Carol Spieckerman, President, newmarketbuilders

When we start talking about brokers going away, I think that will be the death of localization. Although their role will continue to evolve, brokers need to touch local merchants to leverage local opportunities for profitable growth...for both the brand and the merchant.

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Ralph Jacobson, Global Consumer Products Industry Marketing Executive, IBM

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