I was chatting with a senior industry individual recently. His thesis was that as retailer competition is driven in part by the so-called “Discounters” (read our blog – “Discounter”), that meant that supplier-retailer relationships were increasingly about getting to the lowest possible “no frills” price, which meant, in turn, drastic cutting of any non-essential overhead costs in their business.
I accept we are in one of the “cut back” phases of our industry. Phases that seem to come along regular as clockwork and when the top line stalls, panic sets in and costs get cut. But in the same way that in the past, thinking “category management” was a panacea, the “lowest price” option is also no permanent solution.
When we use the phrase “category management” some might think this is about suppliers doing the retailers’ job for them. A cost that we can “survive” without. But in my view all category management ever offered, was about forging close working relationships and finding “win-win” solutions that first sought to grow the cake and then aimed to achieve a better share of that extra cake. Of course, that implies that if the cake doesn’t grow, then it’s going to be tough to get any additional portions.
It’s tempting to think that because retailers are negotiating hard on price, they are not thinking about how to achieve growth, how to optimise stores, how to improve margins, how to steal share, win new shoppers etc. Of course, they are. And it’s not rocket science to think that to sell to such retailers, then doing more than just offering the same “stuff” at a lower price is the only way to succeed.
The task of figuring out what will get shoppers to buy more, more often, and visit this store versus another, or happily pay a premium for improved benefits (or create efficiencies) hasn’t gone away. And if suppliers can’t offer such strategies, retailers will look elsewhere.
Perhaps the real question is how we seek to do this in a new more streamlined and cost-efficient way. Maybe spending less time and money navel-gazing (often looking backwards) and more on figuring out what shoppers want?