How are manufacturers failing retailers?

Dec 21, 2016
Denise Leathers

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

Outside of rock-bottom prices, what can manufacturers do to help their retailer partners — and, by extension, themselves — succeed? For starters, they can stop treating every chain they supply the same way.

Whether through a unique value proposition, assortment, customer service or a myriad of other variables, differentiation has become a critical retailer strategy. Bob Shaw, president of Concentric Marketing, reports that a shockingly high number of manufacturers spend a tremendous amount of time and effort trying to shove the same products and programs down every retailer’s throat, regardless of whether or not it makes sense in a particular chain’s set.

Moreover, with retailers focused on growing the category, manufacturers should forget about presenting items or strategies that merely swap share between brands.

Added Cadent business analyst Maxwell Legocki, “Establishing your brand as a leader in consumer insights — coupled with both product innovation and strategy — can give you the staying power required to achieve long-term growth.”

While the largest manufacturers are often praised for providing category insights (knowledge doesn’t come cheap), small manufacturers may have first-hand knowledge of some of the fastest-growing niche segments.

One of retailers’ biggest complaints about manufacturers is their failure to accurately predict demand. “Good suppliers share insights that help retailers improve product forecasts and make smarter decisions around purchase volumes,” says Ken Morris, principal at Boston Retail Partners and a RetailWire BrainTrust panelist. “They also help retailers minimize out-of-stocks with insights into delivery schedules, the impact of the manufacturer’s advertising and promotions calendar and enhanced forecasting data.”

Manufacturers also often develop pricing strategies that are non-collaborative and one-sided. Said Mr. Legocki, “Manufacturers underestimate just how much retailers need to understand the ‘why’ behind the pricing.”

Buyers are also bothered by “a constant stream” of new item introductions and line extensions, often without adequate consumer support or even testing, as well as the little forewarnings that often precede package changes — box to bag, smaller or larger size, new dimensions, etc.

On the positive side, while the balance of power has shifted in their favor, retailers seem more willing to support strong partners in the increasingly competitive marketplace.

DISCUSSION QUESTIONS: What shifts in the retail/manufacturer relationship are suppliers downplaying or failing to recognize? Of the retailer complaints listed in the article, which is most important for suppliers to address?

"The modern strategic supplier is consulting and supporting retailers in all aspects of their business."
"As much as manufacturer marketers try to predict what what works to create demand at retail, their viewpoint is jaded by how and where they live."
" conclusion is that the retailer side too often sees the manufacturer not as a partner, but just someone who “makes money selling product.”"

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23 Comments on "How are manufacturers failing retailers?"

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Doug Garnett

Retailers need strong manufacturers and manufacturers need strong retailers. When one party becomes weaker, the entire channel suffers.

And the primary area where manufacturers are failing is in spending the money needed to create awareness of their product and brand value — awareness that increases store traffic and pays off for both retailers and manufacturers.

However, the incredible pressure to discount from retailers also forces such low margins on the manufacturer that they can’t afford the investment in advertising needed to create demand for the value they bring.

We’ve had tremendous success solving the problem when retailers and manufacturers team up with commitments which make it possible to afford the significant advertising investment needed to create the mass-market perception of value.

Unfortunately, these team situations are rare. And that leaves new products supported by such small communication budgets that they have no choice but to hope for viral success — but they’d be better off standing in Grand Central Station whispering their new product value than trusting in the viral hope.

Keith Anderson

The most collaborative manufacturers are approaching retailers as partners.

For decades, leading suppliers have focused on solving problems with retailers that transcend the supplier’s portfolio of brands and products (focusing on growing and supporting categories, departments, store formats and corporate initiatives).

The modern strategic supplier is consulting and supporting retailers in all aspects of their business — including in lofty areas like their business model and how to adapt to a changing shopper and changing competitive landscape.

These retailers and suppliers recognize their co-dependence and shared destinies amid rising stakes.

Kim Garretson

Here’s the problem with what’s being proposed in terms of better data sharing and communications between the manufacturers and retailers: no knowledge of the future purchasing trends and plans of the consumer. We are in an age where it’s often said the consumer is in control. Yet the industry still is merely guessing at what the consumer wants and will do in the future, despite their tech tools.

Sixteen years ago Seth Godin coined the term Permission Marketing and proposed simply asking consumers for consent to market to them based on their future interests and plans. I predict 2017 will be the year when we see this new vital dataset emerging at scale, and many of these issues we see today will start to disappear.

Chris Petersen, PhD.

Simply put, the greatest miss by suppliers is the fact that omnichannel is the new normal.

The product-centric selling of the past is no longer working or profitable for retailers. Retailers can’t afford to just buy a “product line.” They need long tail strategies, curated assortments by store, drop ship for fulfillment to homes and rapid replenishment for click and collect. And the list goes on and on.

In today’s omnichannel world retailers need more than “suppliers of products.” They require strategic partners who can meet omnichannel consumer demands of “anytime and everywhere.”

Adrian Weidmann

Regardless of the contractual agreements in place, retailing is a consignment business. Integrating new technologies and their associated business processes, manufacturers, retailers and shoppers alike will benefit from acknowledging this reality. By monitoring and tracking each product from manufacturing (even sub-assemblies in some situations) all the way through to the retail shelf and beyond manufacturers can maintain a near real-time visibility on every item in the distribution and supply chain. This allows the manufacturer to manage production and out-of-stocks in order to provide their customers a frictionless in-store shopping experience. The retailer pays for the items sold, the supplier knows immediately what items are selling in specific markets and locations and can maintain production and stocks accordingly. Retailers such as Macy’s and Walmart already are establishing the foundation and infrastructure for this very process. I believe this process IS the future of brick-and-mortar retail.

Camille P. Schuster, PhD.

If manufacturers and retailers really collaborated, they would be focusing on their joint consumers. Understanding joint consumers would have each team facing a specific group of consumers that is different for each team — not only on the company level but also at the store level. If that were the case, assortments would better match what consumers want and predicting demand would be more successful.

Ori Marom
The article seems to focus specifically on the grocery category. Arguably, this category suffers the least from the changing trade environment. In other categories, such as apparel or consumer electronics, the need for better manufacturer-retailer collaboration is much more acute. For example, if retailers such as Best Buy did not receive direct assistance in the form of preferred wholesale prices, store-within-a-store contracts and minimum-advertised price policies from brands, they would simply cease to exist. The main problem I see with existing brand-retailer partnerships (of the types mentioned above) is that they uniformly assign the physical store a role in the supply chain that it is no longer suitable to fulfill, and completely neglect the role that it is most suitable to fulfill. Namely, we can all see that stores are handicapped in their capacity to compete on price. Sadly, this must mean that physical stores are no longer good sellers. Consequently, it would be natural to expect that brands recognize and compensate them for delivering the service components of the customer journey. The problem is… Read more »
Lyle Bunn (Ph.D. Hon)

An emphasis on production is expected of manufacturers, but with production capacity far exceeding consumer demand for every product being made, manufacturing success is linked to retail success. Producers that generate brand equity for their label or products and communicate product value serve themselves, retailers and consumers best. Point of purchase messaging (beyond the product label) is essential to influencing selection decisions that are emotion-based. Retail will move to its next plateau as manufacturers assume more ownership for product promotion in the realization that retailers have little loyalty to manufacturer success, as their business value is foot traffic, shelf space and transaction processing.

Dr. Stephen Needel

We are at the point in our research capabilities that we should be able to forecast well the impact of promotions — I’m surprised that this remains an issue. There is no reason to run short of product, from the supplier’s perspective. I’m also surprised any retail buyer would even consider a new product or a line extension without some research showing its impact on the brand and the category.

Ron Margulis

Even with all the data collected on shopping behavior, or perhaps because they’re just swimming in the data, there is still a fundamental disconnect between many manufacturer marketers and front-line retail managers. As much as those marketers, who typically sit in offices in New York, Chicago and LA, try to predict what what works to create demand at retail, their viewpoint is jaded by how and where they live. How much can a 35-year-old hipster with a beard and tight pants living in Brooklyn really empathize with a 42-year-old housewife with three kids living in a suburb of St. Louis?

As for the most critical complaints, if retailers don’t have the product they can’t sell it. Manufacturers need to do everything possible to ensure in-stock positions for all products supplied at all times, especially those on promotion.

Mark Ryski

Given the nature of the relationship, I believe there will always be some tension between retailers and manufacturers. I agree that the retailer complaints expressed in the article are indeed valid, but the suggestion that manufacturers have their act together does not square with my personal experience. Many manufacturers, except the largest, often didn’t have a good understanding of their demand or provide meaningful category insight — they often asked us, the retailer, for market insight.

The best manufacturers viewed our relationship as a partnership and shared information on potential demand, pricing strategy, etc. Most importantly, they were candid with what they didn’t know. I appreciated that. The fact is, retailers still decide which manufacturers they will work with or will not — manufacturers aren’t perfect, and retailers can do themselves a favor by being very clear about what they expect from the relationship.

Ryan Mathews
Manufacturers operate under a series of constraints — of law and convenience — that simultaneously protect and inhibit the growth of their brands. Let’s start with pricing and/or terms of sale which are ostensibly the same for all qualifying customers. Some manufacturers act as though “fair and equal” pricing is where their relationships with distributors starts and stops. But, in the 21st century, pricing is only table stakes. The real magic will only occur when both manufacturers realize that sales and products aren’t the most important part of a transaction and retailers come to the same realization about price and terms of sale. No real progress will be made by either side until both parties agree that the free sharing of high quality, real-time, aligned information is the cornerstone of future growth. And we are talking about information packaged, analyzed and disseminated using the tools of the social scientist, not just a computer coder. By co-developing sophisticated consumer models manufacturers and retailers could build their businesses together without violating any law or making margin sacrifices… Read more »
Anne Howe

Retailers and manufacturers would be ahead of the game if they focused on a true and two-way relationship with core shoppers of each retail chain. The days of mass influence are about over, as shoppers today expect that if “you know me and I give you information about what I want, then you should respond and reach out to me accordingly.”

Retailers and brands working together to react to and deliver upon the expectation of personalization will have more success together than individually. Doing this right takes a village made up of folks from multiple disciplines from both camps. It’s most successful when a neutral lead (agency or consultant) can help negotiate hurdles and keep the team focused on the needs, wants and expectations of the shopper!

Shep Hyken

Perhaps the relationship should move the manufacturer from being a supplier to becoming a partner. Two heads are better than one. Synergy plays a role here where the sum of the two (manufacturer and retailer) is greater than the parts. When a manufacturer can share knowledge that is helpful to the retailer. It may translate into more sales, and the retailer will (at least should) reciprocate with bigger orders.

One of my favorite examples of this, while not necessarily a retail example, is when Ford asks its suppliers to cut prices. But it did so collaboratively. In other words, there was an effort to work together so that the price reduction didn’t reduce the supplier’s margins. They came up with creative solutions to save money. And the same can happen for manufacturers and retailers. It doesn’t have to be price. It can be anything that the two sides collaborate on to create better results.

Herb Sorensen
I think this is an incredibly obtuse line of thinking, as is the question. Because it fails to come to grips with the messy structure of retail. When I sold my company, I told the buyer to never forget that the retailers have ALL the power, but that the brands have ALL the money. (So I always state fundamental truths starkly, to keep myself thinking right — I know a thousand caveats!) This is because as a supplier to both, I never tried to get rich off retailers and always used my small access to retailers to leverage money from my RICH supplier clients. The strength of the retailer relies on the fact that they have the hammer and can control what goes on inside their four walls. Ahem, again, caveats, caveats. But for very large retailers, the power IS formidable and the gross inefficiency of their stores, relative to the shoppers, is THEIR fault. But it’s a very natural and fundamental fault. BECAUSE, they do not “SELL” to shoppers — the brands really do… Read more »
Zel Bianco

Obviously this discussion has hit a nerve and rightfully so. We, as an industry, have been talking true collaboration forever and change has certainly not been happening fast enough for both sides. There are many things that need attention and my fellow BrainTrust contributors have already addressed many of them.

I believe the most important change that will lead to action is to strategically work together to grow the category and not just your brands. The buyer will not and should not listen to manufacturers that talk “partnership” but only push their brands instead of helping the buyer grow the category. If you work to grow the category for the retailer, the rest will take care of itself. There needs to be a longer-term view. Furthermore, until senior management from both the manufacturer and the retailer allow this longer-term view, we will be talking about this same issue year after year. Quarterly results do not make for a sustainable growth strategy.

Gene Detroyer
I am going to go back a number of years. Back in 2005 Walmart was my biggest customer, followed by Walgreens. With Walmart it was our responsibility to electronically monitor movement in every store and to surface any issues before headquarters knew about them. An out-of-stock was our problem, not theirs. We had access to all the data we needed to be a partner supplier. Walgreens was another story. They gave us no access and in fact had no interest anything we could tell them. Case in point, our product was the Today contraceptive sponge. In Arizona they were constantly out-of-stock in Tempe (home of Arizona State University) and overstocked in the retirement community of Scottsdale. They complained that the product wasn’t moving in the Scottsdale stores, yet never increased the order delivery quantities for the Tempe stores (and never let us move product from Scottsdale to Tempe). I haven’t been vendor since 2008. But my conclusion is that the retailer side too often sees the manufacturer not as a partner, but just someone who… Read more »
Mohamed Amer
The current paradigm flourished in an age when the physical store reigned supreme as a point of purchase and the manufacturers created brands that needed an efficient consumer delivery at one purchase point. The days of a clean, precise, functional risk/reward matrix are long gone. A predictably linear relationship of hand-offs with success measured at units shipped and not about end-customer outcomes is divorced from today’s digital realities. Yes consumers still do the buying but are no longer beholden to the size of a traditional marketing budget. Yes manufacturers need to get their products into the hands of consumers but no longer have to rely solely on retailers. Yes retailers have terabytes of data but rely on manufacturers for the products around which they create shopper experiences. The retail maze is more twisted than ever and requires simultaneous moves in an ever-more-enmeshed ecosystem of equals. Shed the old assumptions and begin with a common view of the consumer at the heart of the cross-industry strategy. This isn’t about tweaking the existing manufacturer-retailer model, it’s about… Read more »
Ralph Jacobson

The failure to accurately predict demand is a perennial challenge that both manufacturers and retailers need to address together. And we’re seeing that happen with innovative partnerships today. These organizations are looking introspectively to discover the “dark” data within their own systems that can help identify demand signals. They are also leveraging external, unstructured data sources like weather, local events, news, social chatter and other forces that affect demand. I believe the time is now to put this challenge in its place once and for all. Again, this all stems from effective collaboration. Easier said than done, however it IS possible, as is being proven in the marketplace.

Manmit Shrimali

It is less about what one side is doing vs. other, but more how both can work together. Data sharing between them is one of the biggest pain points. The single most important thing we have been encouraging retailers and manufacturers to do is to work together for co-creating insights around how to grow a category and not just focus on the SKUs.

Jeff Sward
When I read the headline question, I took it literally. That is that “manufacturer” meant exactly that … manufacturing. Most of the comments are treating “manufacturer” as equivalent to “brand.” So at the risk of splitting hairs I’ll comment from a manufacturing point of view and agree that all of the comments about partnership and communication in-stock positions are still totally applicable. Then I make the leap to, “what’s the most efficient scenario possible?” That would be if the factory is also the brand and the retailer. It’s really only in recent history that’s even possible. The factory has all the product expertise. They hire design and marketing expertise just like a brand would. They create a website like any other brand would. And, poof, they are in business. The web business creates enough brand awareness to move to bricks & mortar. Sure, I have grotesquely over-simplified, but Bonobos and Warby Parker stand as cases in point. They are as vertical and streamlined as possible in this day and age. And from what I read… Read more »
Vahe Katros


Vahe Katros

Joint innovation between manufacturer and retailer. Sounds like a conference and standards opportunity! Who is the keynote?

"The modern strategic supplier is consulting and supporting retailers in all aspects of their business."
"As much as manufacturer marketers try to predict what what works to create demand at retail, their viewpoint is jaded by how and where they live."
" conclusion is that the retailer side too often sees the manufacturer not as a partner, but just someone who “makes money selling product.”"

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