The 5 Ps of a Successful Buyer-Seller Relationship (Part 3) 9/30/2015
In the past two columns of this 4-part series, we discussed how successful buyer-vendor partnering can be applied to the 4 Ps of marketing (product, placement, price, and promotion) and focused on the first P: Product, and the second P: placement. For Part 3, we’ll address the Third P: Price.
I often joke that Raley’s is in the ‘purgatory of medium;’ not big enough to get the lower cost of goods that our largest competitors can demand, but not small enough to be able to make our own rules. Sometimes it feels like we are stuck in the middle, and one of our biggest challenges here is pricing. But the truth is, our medium size give us a nimble nature and flexibility, as long as we have the right vendor partners.
One of the biggest challenges we face as merchants is how to fit new, smaller, often natural and organic vendors into the box we have created by our relationships with the big consumer product companies. While we continue to value our relationships with these large companies, we are encountering new vendor partners that want to compete on shelf alongside those storied partners that have funding available for slotting, promotion, sampling, FSIs, and seemingly much more, while still making our costing hurdles. And while we want to give those new vendors a chance, we still need to make our budgets.
When I was managing the bakeries and coffee shops at Raley’s, I developed a counter-top retail offering of grab and go shelf stable items. I offered a small, natural vendor with a delicious product a chance to be part of this program, but it was clear that he was stretching to satisfy our various requirement. But he did agree to jump my pricing hurdle. This seemed fine, until we had an unfortunate recall of the product. We quickly learned that the fees associated with the recall were financially too burdensome for the vendor to handle. Unfortunately, this meant we couldn’t keep that delicious product on shelf for our customers.
Working together with your buyer on what needs to be satisfied today, what can be addressed tomorrow and what maybe can be eliminated in order to make the cost/price equation work is the best way to innovate your way around these challenges.
Just saying “yes,” but not being able to deliver on those promises, like my bakery vendor, will only cause more heartache for everyone. Because we all know what the truth is: If we have the wrong price at shelf, the merchant won’t make her sales, the vendor won’t move units and no one is happy. The right vendor-partners help us to satisfy our ever-evolving needs – including our cost of goods and pricing needs.
And that great vendor partner is willing help us find the ‘good stuff in the middle.’
This column is based on a presentation Megan delivered at ECRM's Natural, Organic and Specialty Foods event, held last month in San Diego. Register for next year's events:Natural, Organic & Specialty Foods: August 22 to 25, 2016, at Sheraton San Diego Hotel & Marina (San Diego, CA)
Foodservice Natural, Organic & Better For You: November 7 to 9, 2016, at a location TBD