R&FF Retailer Cover Story: Do We Expect Too Much of Brokers?
By Warren Thayer, Editor, Refrigerated & Frozen Foods Retailer, and Contributing Editor, Private Label Buyer
Everybody wants to get the right products on the right shelf at the right time, with the right merchandising support. It’s just that nobody wants to pay to get it done.
The net result is that everybody loses, says Mark Baum, partner and CPG practice lead at Chicago-based DiamondCluster International, the global management consulting firm, and
once head of the National Food Brokers Association.
The role of the broker (or sales agent, if you prefer) continues to expand, and some observers say agents are stretched so thin that store-level execution is being compromised,
which hurts the retailer, supplier, sales agent and consumer.
As Baum sees it, there simply aren’t enough resources available to do these jobs as well as they should be, particularly in supermarkets. This leads to out-of-stocks, missed
merchandising opportunities, and a diminished experience for the shopper.
But nobody can seem to agree upon specifically what type of in-store work should be a priority, and just how resources should be allocated fairly. Not that long ago, the manufacturer
and agency were able to deploy retail sales and merchandising teams as they saw fit. Their mission was to make sure that the plan presented at chain headquarters was executed
at store level.
That worked, Baum says, until retailers’ category management abilities grew and they began demanding more frequent category updates and resets. Rebannering caused by acquisitions
added fuel to this fire, along with more frequent store remodels and new store openings.
With the accelerating turnover of store employees — many of whom are part-time and lack experience — the pressure has increased on sales agents to take on more and more tasks.
The problem is, Baum says, that many of the store maintenance tasks are not high priority to the suppliers who pay the sales agents. Retailers are taking the available resources
from the manufacturers and using the sales agent as they see fit.
Some retailers are using third-party services, rather than sales agencies, to perform these functions. They then charge the manufacturer for the in-store work. Baum doesn’t see
this as the ideal solution, either.
“Problems with speed to shelf and out-of-stocks are worse today than ever,” he says. “It’s time for all the players to take a holistic look at the issue. Let’s make a comprehensive
list of activities to be performed, and determine who is best suited to perform them and how to best allocate those available resources. Also, let’s make private label suppliers
and DSD providers part of the discussion in order to make a complete wall-to-wall assessment of requirements and potential solutions.”
The next step, from a management standpoint, would be to develop standards for the programs and fix responsibility and accountability for all tasks, he notes. Under this scenario,
the retailer would have someone at the store level to work with suppliers and agents on agreed-upon programs.
Baum believes supermarket chains putting ever-increasing demands on sales agents are only hurting themselves. “They’re positioning themselves as a higher-cost channel to do business
with, when other channels are growing more quickly,” he points out.
Baum has 10 suggestions for improvement:
- Make efficient and effective resource allocation a priority at your chain.
- Recognize the costs, in out-of-stocks and missed merchandising opportunities, of poor allocation of resources.
- Create a comprehensive list of activities to be performed.
- Determine who is best suited to perform each activity.
- Allocate available resources effectively, efficiently and fairly.
- Include private label and DSD providers in the planning.
- Develop standards for programs, and fix accountability for all tasks.
- Have someone at store level work with suppliers and agents on agreed-upon programs.
- Communicate programs carefully and completely to store managers, so they know when promotions are coming, where POS materials are, etc.
- Negotiate rigorously, but in the spirit of collaboration.
Condensed from Refrigerated & Frozen Foods Retailer. For the full story,
click here.
Moderator’s Comment: It’s a tough issue that’s not being faced squarely. Which of Baum’s suggestions will be the most difficult to implement, and why?
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14 Comments on "R&FF Retailer Cover Story: Do We Expect Too Much of Brokers?"
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Well-run retailers have to be self-reliant. They can’t depend on manufacturers or brokers to solve their problems. And “free” support always has a price. The underlying problem: poor margins lead to profit pressure which lead to staff compensation issues which lead to staff cuts and turnover which lead to retailer demands upon brokers and manufacturers. No one (brokers, manufacturers, retailers) can afford realistic labor costs if margins are inadequate.
Much good discussion. I would like to expand on what Mark Hunter contributed and point out the corollary – no two manufacturers are alike either and don’t all value the same work equally.
This issue continues to haunt the industry and solutions are few and far between. Lots of good discussion fodder above!
I did not see the technology connection to this issue in my first response, but I have thought of one since. One of the big benefits from technology has been the advent of message based interfaces that provide continuous feedback from events occurring at store level and timely distribution of corrective action from headquarters. This has led to a reduction in “middle management” and may also lead to inconsistency across an organization for “how” things are done. Today’s technology captures the results of various events in the store but does not tell how the results were achieved. In some sense it is the same lesson the military has had to learn. There is no substitute for “feet on the ground,” with supervisory personnel from both organizations in the broker/store relationship assuring the planned “rules of engagement” are followed.
What’s the most difficult? Having top management be convinced that people and jobs need to be dedicated to being responsible for their own analysis of consumers. Outsourcing the compilation and distillation of scan data is certainly a good idea. However, internal people need to really analyze what that data means AND do their own consumer research about most valuable consumers AND do their own research on what those valuable consumers want. Then comes the difficult task – implementing the list of activities.
Yes, we expect too much from brokers simply because nobody has precisely defined what is expected of a broker; and that’s because there are no two retailers alike in terms of their expectations and needs. The role of the broker will continue to evolve and in the long-run, their importance will only continue to increase in line with the increasing strength of retailers. This will never decrease the cost containment pressure they’re under but this is no different than the pressure retailers and manufacturers are under due to the competitive marketplace called retail.
There are a lot of demands on the brokers in-store that consume time that could be devoted to merchandising at the shelf. These include reporting back to manufacturers and retailers on shelf conditions, display locations and promotion fulfillment. In addition, some brokers treat such activities as revenue sources for research houses as well as the aforementioned retailers and manufacturers.
Interestingly, few of these reporting requirements would be needed if the broker had the time, direction and tools to correctly merchandise the shelves in the first place.
Store level execution doesn’t have to be compromised so long as the crews responsible for implementation have the right tools to do their jobs quickly and accurately. Retailers, Brokers and Manufacturers have had a tremendous amount of success using Image Strips and Back Tags for new store set-ups, remodels and category resets…cutting the set time by more than half the time. These are the types of tools that will help in the future to make in-store execution more efficient for everyone.
The answer to this continued issue may be something that’s been discussed for quite some time now — Activity Based Cost. Suppliers now have the means to effectively measure all costs in servicing retailers needs and expectations. The variable costs of serving retailers needs can be accommodated with adjusting cost of goods to support added services, including in store retail support.