Many suppliers find retailers, especially the major chains, brutal to deal with and feel that they are squeezed by the retailers’ power to control access to the consumers they need to reach, writes Julian Dent in ‘Distribution Channels: Understanding and managing channels to market’ (www.vivagroupindia.com). He cautions that suppliers who get sucked into the ‘zero-sum’ game of trading blows with retailers will end up losing market access or profitability and sometimes both.
Retailers are facing challenges as never before and, though they will rarely admit it, need their suppliers to partner with them in addressing these challenges, the author observes. They can no longer win by bludgeoning their suppliers into submission, he instructs. “The senior management of the top retailers recognises the need for new levels of supplier partnership and is looking for suppliers who can raise their game above the classic ‘buy-sell’ relationship.”
The arrival of international players in local markets has been the catalyst for major changes, including the consolidation of local players, the formation of alliances and experiments with international operations by national retailers, Dent finds. “These pressures have highlighted some of the limitations of the more decentralised players, who struggle to achieve consistency of brand experience.”
Since globalisation can make leading retailers more powerful, the author advises suppliers to be proactive and share with retailers their knowledge of local markets. “Above all, retailers want to present a consistent face to the world. They look to suppliers for consistent service, quality and support. If these standards are achieved, performance by both parties will be rewarded with access to previously untapped markets.”
In the author’s view, a key success factor and a focus for retail innovation will be about helping consumers make sense of complex new products and services, and packaging them for easy consumption. “Tesco online does this brilliantly by uploading customers’ shopping lists from in-store shopping (captured through Club Card identities attached to POS data), so that they can easily find the particular loaf of bread, etc., that they usually purchase – instead of trying to spot it from the 133 types of loaf available online.”
(At the time of writing this, though, a ‘Tesco’ story is about its ‘driving customers bananas with nit-picking rules about how shoppers should dress and behave in store,’ as Tim Spanton writes in www.thesun.co.uk. The trigger for the report is the barring of a shopper from supermarket because he had his six-year-old daughter on shoulders.)
Dent urges suppliers to match the ability and desire of retailers to develop new channels – geographic as well as conceptual. “Evolving retail formats require suppliers to showcase their products in ways that make quality, style and value immediate – especially in the virtual ‘shop window’ of the Internet.”
Retail is an expensive channel to go to market, but its scale and reach deliver sales volume and growth acceleration that can transform a brand’s position in the market, the author notes. “It pays to research the channel well, identify the opportunities of best fit with the retail accounts that address the target consumer for your products and deliver a well-timed proposition that hits the buyer’s objectives.”
And, above all, focus on the retailer’s key challenges – viz. getting customers to the store, getting them to shop at the store and buy the most profitable products, and getting customers to return – concludes Dent.
Recommended read for the marketing professional.
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