BrainTrust Query: How can suppliers choose “Big Winner” retail partners?

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Jul 18, 2006
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By Art Turock, Sales Growth Strategist, Art Turock & Associates

(www.turock.com)


Many consumer packaged goods manufacturers use jargon such as “Winning with Winning Customers” to describe how they decide which key accounts deserve the greatest alignment of resources in “win-win” collaborations.


For the past 20 years, most of these collaborations have focused on linking information technology and logistics to remove excess costs from the supply chain. For the supermarket channel, the results have been mixed. Yes, costs are reduced, but the byproduct of improved efficiency has been increasing shopper irrelevance. Shopping trips, market share, and sales volume have drifted to alternative formats. Consequently, supermarkets are becoming a less profitable class of trade for suppliers.


Perhaps as a consequence, retailers are putting a higher priority on driving differentiation and sales growth rather than emphasizing more cost cutting, as seen in research studies sponsored by GMA, IBM Business Consulting, and GMDC.


So, in allocating their limited resources to situations where they can derive the best ROI, suppliers need to be choosy in collaborating with retailers, i.e. sticking with the “Big Winners” — which begs the question, “Who will be the big retail winners in the future?”


Discussion Question: As a retailing handicapper, what should suppliers give weight to in predicting winning supermarkets in the next five to 10 years?


While it’s tempting to set a supermarket’s size and sales volume as the primary criteria for selecting winners, these measures don’t predict future success.
The weakened condition of Albertsons, Winn-Dixie, and Ahold prove that point.


What predictors of success would be on your list? Uniqueness of strategy; pricing model (Hi-Low, EDLP/EDLC); market share position in major regions; data
mining capability….?

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9 Comments on "BrainTrust Query: How can suppliers choose “Big Winner” retail partners?"


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Paul Waldron
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Paul Waldron
14 years 7 months ago

The winning retailer will not be judged by size, but consumer acuity. A shopping environment must provide consumers the information needed to make wise choices for both their health and wallet with easy to understand tools such as image shelf tags and signs. A predictable shopping experience without the frustration of product out-of-stocks and convenient shopping alternatives such as online shopping or in-store childcare centers to accommodate shoppers hectic lives also create a winning store. The winning store must focus on excellent in-store execution and exemplary customer service as their key differentiators.

Gene Hoffman
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Gene Hoffman
14 years 7 months ago

The future of retailers selling food is best called “perhaps” and the important thing is not to allow that to scare you if you are a supplier.

Who among us can assuredly predict who will be the most successful retailer of food ten years from now? A look at the long history of the food industry reveals the past answers could have been A&P, National Tea, Food Fair, Vons, Colonial, Wrigley, etc., which indicates the guessing game is a wee bit flawed. But if you spot a company with a visionary leader who consistently produces better than competitors, go with that flow so long as that is true, but stay vigilant and flexible.

Conclusion: Serve every retail customer better than anyone else could serve them. You’ll get your fair share of the big pie.

David Mallon
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David Mallon
14 years 7 months ago

The fundamental error here is in allocating support by account. Manufacturers need to start analyzing promotional events and invest in those while weeding out the losers. After all, a profitable event in a bad account remains worthwhile. The practice of allocating by account only came to be because manufacturers needed budgeting control over their trade funds. At the time, account allocation was the best method they could put in place. But the availability of data and modeling capabilities allow better decision-making today — at the EVENT level.

Camille P. Schuster, PhD.
Guest
14 years 7 months ago

The winning retailers will be those with good cash flow and profitability. How will that be created? The successful retailers will manage the paradox well: continue to drive costs out of the system and serve the needs of their consumers at the local level. Letting up the focus on cost efficiency will allow competitors to overtake you and undermine any advances you have made. Not paying attention to consumers at the local level opens the door for any competitor who does. The winners are those who manage the paradox well.

Ryan Mathews
Guest
14 years 7 months ago

Couldn’t agree with Gene more. You want to pick a winner? Find the best example of the combination of adequate capitalization; a great leader; an innovative organization; and a company that really listens to customers and acts on what they hear.

Mark Lilien
Guest
14 years 7 months ago

Every supermarket supplier already knows who the best-managed companies are. The suppliers know which retailers can be counted upon to execute promotions effectively and which retailers have the least successful managements. The suppliers know which buyers are most skilled and which buyers need development. You could probably run a decent investment fund just by polling food brokers and major wholesalers, asking them to rate the management skills of their customers. However, it often still pays to work with the less-skilled operators. Even if they haven’t got a long-run future, they’re still buying plenty today. Just be aware of their execution capabilities.

Leon Nicholas
Guest
Leon Nicholas
14 years 7 months ago

I agree with what the commentators have said so far. The way I think about it, stick with supermarkets that are changing their formats (e.g., Safeway’s Lifestyle conversion) as rapidly as they possibly can. The faster the better. Most have already waited too long or hoped that an olive bar or expanded cheese selection would do it — if you see radical change in the stores, then they’re a safer bet — assuming they can afford it. Nothing short of drastic measures, in my view, is required, to keep most supermarket operators relevant.

M. Jericho Banks PhD
Guest
M. Jericho Banks PhD
14 years 7 months ago
Some years ago, while consulting for Meijer, I was asked to facilitate an interesting relationship with some of their largest manufacturer suppliers. Meijer had discovered that they were getting passed over for supplemental promotional funds, in favor of the second-largest retailer in each of their markets. (Supplemental promotional funds are those that are off-plan, but made available from advertising budgets and elsewhere to boost sales at the ends of quarters or to become more competitive with other brands.) Manufacturers had discovered that when spending a promotional dollar with Meijer – or the largest retailer in any market – only 50-60¢ was passed along to shoppers. But when working with the second-largest retailers, as much as 80¢ was passed along. Manufacturers got more bang for their buck with the smaller retailers. It was my job to convince selected manufacturers that Meijer would pass along more of any supplemental allowances they received. It worked for a while with a few manufacturers, but Meijer inevitably returned to previous practices. Today, manufacturers still look to smaller retailers who will… Read more »
Stephan Kouzomis
Guest
Stephan Kouzomis
14 years 7 months ago
Humbly, we are missing the boat again! Closeness to shoppers, sharing data, growing in the marketplace(s) are all well and good. However, a supplier would have two categories of consideration for partnering, or as mentioned, the “win-win” proposition. Forget the “Big Boys,” for their mindset is “sales, sales, sales, and therefore, a penny or 5 cents will trickle down to the bottom line.” The words used to describe a partnering, or ‘preferred’ retail customer relationship TODAY, are: 1) the need for a consumer oriented retail culture of operation, top/down, and bottom/up; 2) willingness to change/modify the business model and shopper approach; 3) educating store associates to cater to and offer knowledgeable information to shoppers; 4) UNDERSTAND THE GENERATIONAL DIFFERENCES and offer a) service and b) foods and meals that speak to the differences of each generation; 5) engage the shoppers and non shoppers at set periods for insights, ideas, future perishable foods, service needs and competitive weaknesses; and 5) supplier/food manufacturers work side by side with retailer at all points mentioned. The tactical programs and… Read more »
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