Transparency & Candor are Critical for Successful Retailer-Supplier Relationships 12/1/2021
Relationship and partnership blind spots can do more than hurt you; they can put you out of business.
These days, our industry is facing increased costs, looming inflation, limited face-to-face interactions, and an evolution in consumer behaviors, making strong retailer-supplier relationships more important than ever before.
“Partnerships are under more pressure than ever,” says Dan Mack, Founder and Managing Director of Mack Elevation. “They are under duress because of the pandemic, digital transformation, hyper-competition and a lot of additional factors.”
During his presentation at ECRM’s Global Market: Fall Experience, Mack discussed insights from his discussions with 25 CPG sales VPs as well as 10 leading retailers on how today's fast-evolving retail landscape has impacted their relationships, and how they can best work together. See below for the full video of his presentation, which was moderated by ECRM SVP of Retail Wayne Bennett.
According to Mack, recent interviews he conducted with vice presidents of sales within the CPG supplier world revealed the following concerns:
- “Due to limited data availability, retailers don’t appreciate the size of Amazon’s business with us.”
- “We are embracing more financial rigor in everything that we do.”
- “We must critique each retailer’s cost to serve & improve overall profitability.”
- “Digital cost increases are not our problem.”
- “Retailers are no longer merchants, but bankers and supply chain specialists.”
- “Every retailer must now prove their value. Leaders of sales are following the revenue, wherever it leads.”
However, he noted that suppliers do have more opportunities than ever before. “Years ago, all of the power was on the retailer side,” he says. “That’s not true anymore. They can build their business with specific retailers. They can go direct-to-consumer. They can build it all through Amazon. They can build it through unique digital platforms that might be right for their business. They have choices, and the rules have changed.”
Because of this, they are more closely evaluating their retail relationships to improve their retailer return on investment and are more willing to walk away from those that are not delivering on it. They are also looking at metrics such as their digital return on advertising investment, in addition to metrics around trade spend, brokers and other forms of conventional marketing.
The retailer perspective
On the retailer side, consumer’s changing omnichannel expectations – particularly driven by the pandemic – have dramatically influenced most retailers’ profitability, pricing, and merchandising. According to Mack, retailers he has spoken with say the cost increase in serving today’s consumer is not sustainable unless retailers and suppliers have a real meeting of the minds related to the costs associated with direct-to-consumer and curbside pickup sales.
Following are some concerns conveyed by a number of top U.S. retailers to Mack in his interviews:
- “All the work the consumer used to carry is now supported by the retailer. The dramatic increase in costs associated with curbside pickup and digital must be offset by our partners.”
- “Our vision has not changed but our job descriptions have evolved to cover the whole omnichannel responsibility.”
- “Retailers are being evaluated on repeat purchases, shopper segmentation, product in-stocks, consumer acquisitions, views & impressions.”
- “Our supplier partnership expectations have increased. What am I not seeing clearly?
Shedding light on the blind spots
There are several things suppliers and buyers need to do to help shed some light on the blind spots, according to Mack. First and foremost, they need to stop thinking of virtual meetings as something separate or different than those done in-person. They are now simply just another engagement tool, no more, no less. Suppliers need to be just as effective in a virtual buyer meeting as they are in-person, or on the phone. The fact is, B2B buyers prefer virtual to in-person meetings, and they find them more effective, according to recent McKinsey & Co. research.
On top of this, virtual meetings provide buyers with more of the one thing they cannot make more of: TIME. They are simply able to accomplish more with the time that they have because of virtual. So virtual meetings are table stakes now for all salespeople; they must up their games on the screen and learn how to engage viewers as effectively digitally as they do in-person.
Strong retailer-supplier relationships also require a focus on balancing supply chain excellence with profit in a way that makes sense for both parties. In a world of logistics disruptions, increased ecommerce activity, and rising costs, this may require some difficult discussions and even some big changes from the way business has been done in the past.
Because of this, a spirit of candor and transparency is more important than ever before in order for suppliers and retailers to attack these new challenges together.
“Elite partners do four things,” says Mack. “First, they create traffic by defining categories. Second, they are big on conversion; they constantly expanding the market basket versus trading sales. Third, they are holistic, understanding what’s around the next corner. What are the threats? What are the growth areas? And finally, elite partners are always thinking about the future.”
And as we all learned from experiencing the rapid changes to our industry over the past two years, we have to be fast learners, able to turn on a dime, and solve problems with lightning speed.
Most importantly, we need to be able to do all of this – together.