We had an excellent networking event this fall that focused on enhancing relationships between Vendors and Processors. In today's fiercely competitive environment, differentiating ourselves by building strong supplier-retailer relationships that seek to understand the customer while staying abreast of consumer trends, could be the element that sets us apart from other Vendors.
We began by looking at retail establishments past and present. It used to be that Category Managers would work with a given product from concept through shelf. However, today's fiercely competitive retail environment has changed that practice and has in turn provided another opportunity of sorts which could see suppliers becoming providers of choice by assuming a portion of the Category Manager's role. Labour costs and time requirements (we are all wearing multiple hats) have escalated this need and through processor involvement, the retailer can gain an edge perhaps against others in the marketplace wooing fulfillment of consumer needs.
David painted the current and future landscape of the retail sector asking us to consider aspects such as the role/pressure of US influence, big box stores, mergers and acquisitions, overall supply chain efficiency and ongoing desire of Canadian retailers to protect themselves. Participants agreed without a doubt that competition is fierce and such competition inevitably leads to profit erosion and price wars. Labour, as alluded to above, is one of the biggest retailer expenses and mitigating costs in that regard could potentially provide Retailers with a means to deal with this turbulence. Casting a glance at the value chain, enhancing supplier relationships that could take on some of the Category Manager's responsibility could be a tremendous cost saving opportunity for them. The downside of course is that it will put more onus on suppliers who are also facing multiple constraints and an equally competitive environment.
This climate has inevitably led to a call for a code of conduct. Such a code could enable processors and their sales teams to be more competitive but to do so effectively, Suppliers will need to understand the landscape and take strides in differentiating themselves accordingly. There is a trend afoot in some of the big box stores to develop "Category Captains" to enhance this Retailer-Supplier relationship.
From a vendor selection standpoint, 10 or 15 years ago there was a set criteria that category managers referred to which included such product aspects as:
Vendor selection expectations have grown beyond these basic fundamental items. Today, Retailers are searching for Vendors who are not unlike personal consultants when it comes to category management. For the Processor, this new relationship would further the marketing process that much more and would entail taking time to analyze and identify retailer needs in an effort to build a relationship that results in repeat business.
We talked about what some of the key criteria/opportunities for the "Vendor Consultant" might be that would enable the development of a good relationship in this regard:
Devise Merchandising Plans
Construct - plans/mixes
Some interesting statistics were shared: 90-95% of all retailers in Canada will not make $1 Billion in a year... and 72% of retailers are really just small shops.
A store tour was suggested as a great way to garner insight on the totality of the business and gain a perspective on current trends that might carry over to our product offerings. During the tour, David challenged us to consider elements such as:
Brands carried - good reputations?
Clean floor policy
Operation well plannogrammed - take photos/draw
How do they stack products?
Price matching with Walmart
Know their philosophies and policies
UPC scanned products?
Supporting the opportunities a store tour provides, information from OMAFRA was shared that also spoke to the positive results that participating in retail tours or vendor engagement days allow. (Connections: Retail Tour and Vendor Engagement Day Help Longo's Buy Locally, OMAFRA, Investor, Summer 2014, p. 6).
Merchandising plans can help you identify what brands should be on the shelf. Such a plan would take into consideration brands, timing, assortment, allocation (distribution), forecasts and innovativeness elements.
Using Assortment as an example for your company consider the trends in grocery, produce, bakery and packaging - what are some of the larger trends? (Gluten free/Clean label/Local Vore/Ethinicity/Nutritional Values/Convenient Packaging/Price Points/Health and Wellnes/Eggless/Generational Differences/Ready to Go/HMR - Home Meal Replacement... etc. etc.) Always bear in mind that the consumers of today are much more knowlegeable and have more ready access to information at their fingertips.
It is important to stay abreast of the changing consumer and Statistics Canada can provide some relevant information for Retailer and Supplier alike. As an example, did you know that there are 34.5 Million people in Canada and our family size is shrinking from 3.9 to 2.9 according to the last census? And, in 2011, government statistics reported that more people were living alone and that 44.5% of couples had no children living with them? Industry needs to respond accordingly - through packaging sizes, understanding ethnic requirements, being innovative, etc. etc. - at the end of the day, all sku's need to mirror ongoing trends and country demographics.
In addition to the above, we also discussed distribution types, planograms, and understanding the Retailer's objectives from a seasonality and promotional opportunity perspective.
"Vendors Take the Wheel" (Canadian Grocer, December 2013/January 2014, p. 24) written by David, is a great article that speaks to the development of category experts.
Our Guest Speaker left us with one final thought: How can you as a Processor be different from your competitors and stand out?
A great presentation and thought-provoking discussion - very special thanks to our Speaker - David Bartolini - our Host, Furlani's Food Corporation, and our Members and Guests for participating in this first session on Retail Management!
All the best as always!
Bren de Leeuw, Director - EMC Food, Beverage, Bio & Ag Program Canada
Excellence In Manufacturing Consortium - firstname.lastname@example.org - 519-372-6009
EMC receives funding under Growing Forward 2, a federal-provincial-territorial initiative. However, the comments or opinions expressed on this blog are solely those of their respective contributors and do not necessarily represent the views of the Government of Canada or the Province of Ontario.