BrainTrust Query: Should Vendors Ditch ‘Can-Do’ Attitudes with Retailers?
By Carol
Spieckerman, President, Newmarketbuilders
Edited offerings, limited distribution, getting
behind one or two brands… I remember when narrowing down options was
a way to a retailer’s heart… and when the phrase “You know what’s best” actually
came from the retailer side of the table fairly often. Of course, that
was back when vendors were a vital resource to retailers!
Over the last decade, retail vendors have
expanded their product and brand portfolios, points of distribution, door
counts, price point options, and sourcing selection. Vendors have become
so conditioned to “can-do” that giving direction feels alien and downright
risky. While this defensive, order-taking mindset has served vendors well
over the past decade (and certainly through the recession), here’s four
reasons why we’re advising our clients to close down the smorgasbord and
return to more prescriptive tactics.
1. Option Overload: Just
when the moving parts of retail seemed to be getting manageable… and
measureable, along came digital media and social networking; both of which
are multi-faceted worlds of their own. No retailer claims to have this
all figured out, yet all of them are jumping in regardless. You can’t afford
to play wait-and-see or to be all over the place. Now is the time to collaborate
with retailers on emerging media and to decide where you will and won’t
play.
2. High Turnover: Buyers
and other decision-makers have been transitioning out of positions at faster
and faster rates as retailers build bench strength and groom future leaders.
The swinging door has only sped up as retailers eliminate and consolidate
positions at HQ. That means that vendors and service providers that have
expertise, category knowledge and insight have a real advantage… but
only if they step up and use it!
3. The Search for Certainty: What
is more destabilizing than uncertainty? More uncertainty! Retailers have
never favored confused, overwhelmed or tentative vendors and in a difficult
retail environment, all of those traits are magnified. It’s time to have
a point of view and to instill confidence in your organization and in your
retail partners. No one is going to march boldly ahead with a mouseburger!
4. The Right Brain of Retail: Retailers
are shutting down silos and they aren’t relying on quantifiable metrics
exclusively; that goes for how they choose vendors and brands as well.
Retailers want to see coordinated effort, collaboration and a value around
non-quantifiable touch points on the vendor side. We call this shift the “right
brain of retail” and
vendors will need to evolve into this mindset with their retail partners,
not behind, if they want to have a seat at the table. This is particularly
true as those trashcan fires start to die down and consumer confidence
moves north. Consumers are getting ready to spend and retailers will be
looking for bold ideas in short order.
It’s time to grow a voice, edit the menu,
crank up the innovation, and get out your prescription pad. Options
aren’t answers anymore… and “rationalization” isn’t always rational.
Discussion
Questions: Is it time for vendors to become more assertive and less
open-ended in their dealings with retailers? Do you agree that the
opportunity as well as the necessity is there? What do you think
of the reasons justifying vendors being more prescriptive in retail
partnerships cited in the article?
The nature of collaboration between vendors and retailers is too nuanced to determine a “right or wrong” answer to this question. A lot depends on the balance of power in the relationship: Is it a small vendor dealing with Walmart, or a giant food chain, or P&G? It also depends on the strength of the retailer’s internal team: Can the merchants benefit from the expertise and point of view provided by a strong vendor?
Any good negotiator recognizes the difference between true collaboration and “just say yes.” Constantly giving in to a retailer’s every demand is not the same as building a long-term partnership. Collaborative planning and good execution require mutual agreement on goals, and creative solutions to those issues that may seem at first glance to be contradictory. For vendors, this is not the same thing as constant accommodation.
When I think about the changing landscape that has been driven by retail consolidation and the expansion of food sales into numerous channels the ideal situation has to be in the area of retailer/vendor collaboration.
I think both sides of the table have access to information and consumer/shopper insights which need to be shared in order to maximize the overall revenue and profit potential. I also believe that both sides have brand equity agendas that need to be driven and protected and that will require each side to say “no” from time to time.
There are also areas in which the CPG must lead the retailer and vice-versa and only a collaborative approach to dollar and resource investments will work for a long-term, positive relationship.
Vendors have always benefited from standing for something, being able to provide a point of view and clarity, and offering a way for the retailer to differentiate itself from other retailers (and in so doing, allowing the manufacturer to differentiate itself from others in the eyes of the retailer).
The suggestions are worthwhile, but I add a cautionary note: don’t be pedantic or certain for the sake of certainty at the expense of truly adding value. The strength comes from bringing value, not in being positive of oneself.
In this economy especially there is a tendency for vendors–we hate using that word–to be so desperate as to (can-)do anything to get business. Nothing is worse than doing “anything” when that anything leads to a compromise in quality, brand integrity, or doing things that are unprofitable. Truly the worst of all worlds is a combination of two or three of those things.
Having a point-of-view, backed with facts and experience rather than opinions, serves everyone well. Smart and successful retailers know that and will ultimately place a high value on it both now and for the long-term.
I agree with the concept that a great deal depends on the relative power position of the retailer and the vendor. When the retailer represents a dominant portion of the vendor’s business it is harder to say no to their requests. Another source of power is information. In some cases the vendors knows more about the retailer’s business than the retailer does. In other cases, the opposite is true.
It also depends on the skill of the negotiators on both sides of the desk. We often see examples when one has been trained (creating a distinct advantage) and the other has not.
Hopefully both understand that the process is not about “winning” per se it is about selling more product. This generally requires collaboration and not confrontation.
It isn’t a huge surprise
That vendors want to assize.
They might have clouded their way
And now there’s some hell to pay.
So they’ll become more assertive
But their plans should not be furtive.
The goal of the vendor’s game is to win
But being flexible isn’t always a sin.
Using good data and common sense
Will open the door of recompense.
What vendors do now for success or gloom
May be lesser to the choice of with whom.
Some key words have been mentioned and bear repeating. “Innovation.” Depending upon the type of retail, this can mean many different things. For food retailers, innovation is more often talked about and not executed. “Collaboration.” Aren’t you tired of that one? This has everything to do with information sharing. There are some great pilot programs going on right now with key retailers and CPGers. If they prove successful, this will be a chance to break away from the decades-old adversarial relationships. “Differentiation.” I hate that one, too. Keep it simple. The CPGer should make unique offers that their competition cannot easily emulate. The retailers should ensure those offers enhance the shopping experience. That is what the customer will respond to. That is what drive revenue growth. Learn from what companies are doing in other regions around the globe. We are not all that innovative, differentiating nor collaborate in the US, sadly.
The notion we are exploring, said another way is “leading those you serve.” The knowledge, insight, and experience vendors or suppliers have access to is ever more significant. Retailers must put aside their “position of power” and listen to what is being suggested, offered, negotiated and yes at times taken away. In buyer/seller relationships, when “service leadership” is exercised properly, vendors are capable of providing an exceptional level of service and building enormous trust. There is nothing better when done right.
Retailers have certainly been more accretive in the last 10 years in voicing their opinions on how they want things done by the vendors. That said, I believe the most successful retailers and vendors are the ones that sincerely sit down and build plans that benefit both groups and more importantly, the consumer.
Over the last 6 months I have been meeting with executives on the vendor side and encouraging them to present bolder ideas to retailers and be sure the retailer can easily understand the benefits for them and their consumers. Even with retailers building their own Private Label assortment there is plenty of room for vendors and their innovative product and marketing horsepower.
We have used the words “Collaboration” and even “Category Management” loosely over the last decade. The vendors and the retailers that truly sit down and strategize together will be the ones that prosper most as we exit this recession.
Great ideas. Rather than setting up an “us vs. them” premise, the driver for this piece was the direct conversations we’ve had with retailers. They’re telling us that suppliers are not coming to the table with clear ideas and instead are waiting for direction. We see an opportunity in that for suppliers.
This strikes me as primarily a balance of power issue. Twenty years ago there were far more retailers, so branded vendors held the leverage. With all the retail consolidation, however, brands need key retailers on board in order to build doors. Retail now has the power and has become very used to naming the tune. There remains opportunity for greater collaboration, but only as long as everybody is dancing to the music selected by the retailer.
With smaller independent retailers, vendors still retain quite a bit of leverage, although that too is changing as more independents realize they have more leverage than they thought. With business difficult, and every door precious, even vendors who for years structured their lines into fixed programs are showing a much greater willingness to do things the way the retailer wants.
If manufacturers and brand owners continue to connect directly with their customers through social media marketing, and one-to-one initiatives, they will enhance their relationship with their customer, and ultimately own their customer. When the brand owners owns the customer, the power shifts from the retailer to the brand owner.
Apple, which owns its customers, can dictate how Walmart will sell its product. Paul Mitchell, which owns its customers, can dictate where there product will be sold, and who is or is not worthy of carrying their product. Own the customer, and you possess the power.
Retailers need to rethink their customer relationship strategies.
Retailers know their shoppers and must take the lead in sharing information on HOW to best influence shoppers. This type of analysis is always the best route to positive action. Suppliers, on the other hand, need to be focused on how to increase category sales.