Collaboration at its Finest – Retailers and Manufacturers

collaboration

Retailer/manufacturer collaboration is essential. As consumer preferences are changing at a rapid rate, and organizations are dealing with more data than ever before, it is difficult to maintain shopping preferences that have long held true in previous environments. Lifestyles today are as varied as the neighborhoods we live in. And retailers and manufacturers both have to accommodate this dynamic landscape.

Collaboration should not be exclusive to product launches and instances where the two groups feel they need each other. However, that’s usually the time the two entities are in sync. There has to be a dialogue between the two about data that asks and expands on relevant questions that capture metrics both groups need to know: How many customers are shopping in stores or purchasing a category? How often are they shopping? Number of units? Number of units per trip? How are these metrics changing over time?

Dunhumby describes collaboration between the retailer and manufacturers in the following terms:

  • Measuring promotions by the number of customers vs. number of cases sold or incremental sales
  • Assortment decisions are made to ensure the product offering is appealing to most loyal customers rather than only focusing on new business or carrying products that comprise the most sales
  • An understanding of how products within a category are cross-shopped to understand which products are complementary vs. substitutes
  • Category and department successes are measured by understanding if the number of customers buying categories over time is growing and the dollar amounts customers are spending

There’s a myth that retailers and manufacturers are capturing most or all of the sales available from the customers shopping their stores or brands. But marketers know there is sales potential not captured due to a lack of collaboration. A change in the status quo means their needs to be a change in how retailers and manufacturers try to reach customers. The more collaboration, the more the two groups will capture more sales.

Retailers and manufacturers have the difficult task of attracting new customers while not alienating a loyal customer base. Dunhumby research [1] shows it takes 12 to 20 new customers to make up for the loss of just one highly committed customer.

So what is the right thing to do? Customer-centric decision-making. What does that mean? Looking from the outside in. Not thinking about policies, procedures, and products, customer-centric thinking requires retailers and manufacturers to put the customer first before making any decision, consider how that decision will impact the customer experience. Convenience, ease of doing business, solutions these are all key variables to keep in mind.

In supermarketnews.com, successful retailer-supplier partnerships were celebrated, included Meijer and Clorox for grilling occasions and Frito-Lay and Bi-Lo/Winn-Dixie for leveraging the stores Facebook page for Frito-Lay snacks. One of the most successful stories was that of Hy-Vee, an Iowa based cheese supplier. Tom Hobt, vice president of perishables at Hy-Vee, said the West Des Moines, Iowa-based chain wanted to create more excitement around its cheese displays, and to have more face-to-face interaction with customers. We found we needed passion, he said. We had 130-140 varieties in a 12-foot wall set, but we wanted something a little more. The retailer turned to the Wisconsin Milk Marketing Board, which helped Hy-Vee with training and in putting together promotions such as massive cheese carvings in its stores. Working with a small Wisconsin-based supplier called Hennings Cheese, Hy-Vee was able to put together an in-store promotion that moved 40,000 pounds of Hatch Pepper Cheddar cheese last fall.

Hobt outlined 10 great steps to having successful partnerships with suppliers:

  1. Identify the specific challenge.
  2. Identify potential partners, and be open-minded about finding them.
  3. Discuss the challenges with all the partners involved.
  4. Set a timeline.
  5. Seek a win-win, even if the goals are not the same for all parties.
  6. Be willing to take risks.
  7. Be committed commitment builds trust, he said.
  8. Plan the execution, with realistic deadlines.
  9. Execute the plan, but be prepared to adjust.
  10. Evaluate the results, and share feedback.

Retailers should take heed as well. In order to maximize profitability and put the customer first, retailers have to support an environment that fosters teamwork. The historic adversarial relationship ideas that include beating up suppliers on price have to give way to a partnership where everyone wins. Minor gains and damaged relationships are generally the result of such wars anyway, and that’s not putting the customer first.