Trade Selling – Blueprinting The Retail Buyer

Those suppliers who use retailers or other resellers to take their products to market usually find that one of their greatest challenges is to comprehend just how those retailers plan to differentially present the products to the end-user. Across the negotiating table from them, the retailer will be bargaining price, market funding, and a host of other backing initiatives to create their essential point of difference. So to sell the product in to the retailer or reseller, the supplier salesperson must not only negotiate a proposal based on an attractive mix of profitability, distribution, branding, and promotion, but also be prepared to come up with creative sell-through initiatives. They really must know the buyer’s job as well as they know their own! The relative size and branding of the two parties will play a part in setting the rules of engagement for such a negotiation, and of course factors like available competition and market demand for the product or service will provide the leverage, but often overlooked is the need for adequate ongoing research of the reseller’s business. In my negotiating workshops, I call this ‘buyer blueprinting’ and it really is the essential prerequisite to a lasting and productive relationship between buyer and seller. To get a feel for what should be included in this blueprint, let’s take a look at what is involved in buying goods for resale.Government instrumentalities, conscious of their public accountability, will normally use the tender process to assess price-competitiveness and other relevant terms and conditions, by calling for bids against a well-defined specification. Purchasing officers buying raw materials, capital equipment, and commercial service provision will often take the same approach, allowing only marginal room, if any, for negotiation. The larger retailers will occasionally formalise the bid process too, particularly if the buying function involves a panel, such as a marketing or buying committee. This allows them to screen the ‘invitation-only’ proposals then negotiate just the shortlist. That means that, as the supplier, you cannot expect to even reach the starting grid without adequate investigation to determine your competitive position. Let’s begin with a list of the main considerations the buyer must bring to the table if they are to select the right products for resale. We will simply use this as the basis of our ‘buyer blueprint’.The Right Merchandise – Selection of the right product from what is available is really the end result of the buyer’s evaluation task and it tends to emerge automatically after all the other retailer’s questions are answered. However, for you – the supplier – the real challenge is often the question of ‘what else is available in the marketplace’. You need to realise that, despite all the competitor comparisons you make and all the field market intelligence you reel in, short of industrial espionage, you will never enjoy the privileged position of the retailers. They are never more than a meeting or phone call away from having all your competitors’ upcoming product releases enthusiastically revealed to them. Within the bounds of confidentiality, you need to develop a very open dialogue with the buyer to ensure you enjoy the best possible product brief, right down to detailed specifications.At the Right Time – Stock availability is the essence of your business. It is the same for your retailer. Timing is critical. Too much stock means poor returns on inventory investment; too little or too late means lost sales. It is critical that the buyer is willing to share with you their past and projected run rates for each product and category as well as inventory breakdown, not only for your stock lines, but on an aggregated basis across their total range. Your willingness and cooperation to manage the pipeline right through to end consumer will place you in this trusted position and will ensure that you are continuously privy to this key information. Good suppliers recognise that a moral obligation to ‘own’ the stock until it sells through will deliver ongoing opportunities. Despite the negative connotation, price protection credits, mark-down allowances and stock clearance promotional support should not be seen as costs. Sensibly managed, they should be regarded as investment in the continuity of your business, and become a positive aspect of your negotiating stance.In the Right Quantities – As the supplier, whether a manufacturer, importer or independent wholesaler, you should be no stranger to the relationship between realistic take-up quantities and price. Your retail buyer is no different. Keeping abreast of the retailer’s run rates and stock position, and proactively engaging in the reselling initiatives, will allow you to drive the maximum quantities through without overstocking them. Discounting for a quantity purchase, only to have it sit idle in the retailer’s store-room will ultimately cost you much more than the slice of first margin you gave away. We are all aware of the damming effect of stock back-up in the supply chain. In my live sessions, we liken it to the python that swallowed the rat. We simply cannot feed in any more stock while it has indigestion. So any sign of a slowing sell-through rate or any indication that the sell-in has proved to be too ambitious, must be detected early. Having to chime in to flush a clogged pipeline is an expensive proposition for all concerned, often to the extent of destabilising market pricing across your entire product category.At the Right Price – Responsible retailers will accept that price is not necessarily everything, particularly those who position themselves in the value-add, full service category. However, for those in the limited service echelon, their low margin, low-cost formula can have a devastating effect on your product’s market price. Not only do you need to understand the permanent price positioning of each of your retailers and differentiate your product offer accordingly, but you must also be close enough to their business to recognise any genuine motives they may have for indiscriminate discounting. Aside from pre-planned promotional initiatives, this would normally be prompted by an unfavourable inventory position. However, pricing stability of your product could also be affected by local store-by-store issues. In the case of a multi-store operator, you may need to validate that their pricing strategy is consistent right across the organisation, and that your overall market price position isn’t threatened by random price erosion in the hands of a renegade store manager or in response to an isolated competitive situation.With the Right Margin – Generally, retailers won’t be too shy in making their demands for minimum margin, but may still use the tactic of seeking out best buys with a ‘let’s see what you can offer’ approach. Knowing their market positioning, particularly their profitability model, is a prerequisite to ensuring you are in or near the ballpark. Good suppliers will stay in touch with the competitive market price for each of their products and the average margin per trading category required by each of their major resellers. They will also have an understanding of the margin demanded for standard range items versus that acceptable for special promotional initiatives.In Line With the Season – Suppliers and retailers will both be well aware of the overall seasonal factors impacting on their products. However, as the supplier, you may not be quite as aware of variations in demand by regional demographics, and by locally scheduled events. It is very important for suppliers to maintain a ‘where/when/why’ matrix of retail sales, not only by each individual retailer, but on an aggregated basis across each of their distribution channels. You also need to know the extent of seasonal carry-over stock, as this can affect new season demand and pricing. Often, the only source of this breakdown are your retail buyers.In Line with the Trend – Almost every product has a trend factor these days. It certainly extends well beyond the traditional fashion sectors, and can vary significantly by those same parameters that affect seasonality – namely, region, demographics, and psychographics. Again, aggregating your retailers’ sales analyses is usually the most reliable source of historical data. However, canvassing their ground level input is just as important. Input direct from the showroom not only provides considered input for your forecasting, but the ownership that goes with it. It is vital to involve your retailers in any form of trend analysis. It will not only make them feel involved, it will make them more morally committed.In Line with the Range Structure – Range planning is a critical element of retailing, and it is very important that you encourage your buyer to share as much of it as possible with you. They may be a little reluctant to divulge too much detail, to avoid giving you too concise a prescription to fill, but you must have access to as much of this range structuring process as possible. If you don’t get the total picture, you run the danger of being ‘cherry-picked’, where your star model is selected instead of having your whole line-up ranged, or having your product positioned purely as a gap filler in support of your competitor’s offering. This sort of haphazard product support can devalue your own range planning, by fragmenting your distribution, diluting your brand presence, and impacting the effectiveness of your promotional activities. A much better option is to negotiate the inside running by being privy to as much information as possible.In Support of the Promotional Plan – To meet lead-time requirements, particularly for production and distribution of printed materials such as catalogues, and for stocking against volume events like half-yearly clearances and stock-taking sales, retailers will always run a forward calendar of their advertising and promotional events. Sure, how much access you get to this ‘insider trading’ information will usually depend on the funding contribution you make, but that aside, the suppliers who are able to work most closely with the buyer will certainly enjoy preferential treatment. Good suppliers not only share in this information, but can play an influential part in setting the plan, and enjoy substantial forward order commitments as a result.In Respect of the Competitive Situation – Retail trading can sometimes be very volatile, and retailers, not tied to such a long-range forecasting model, are in a better position than their suppliers to respond to the immediate competitive environment. As a supplier, you are usually locked in to forward order programs and minimum quantity commitments to secure priority and pricing from your production sources. Mostly, you have little room to move, but you can’t stand by and wave your competitors through… you need to act. Subsidising your retailers to address the competitive crisis might be your only course of action. This is inevitably an unwanted expense that will harm your short-term profitability, so to allow you to recoup some of the losses, it is important that you offset it in the form of some reciprocal commitments to future business. This is a classic example of the formal negotiation where the present is traded off against the future… for example, getting your retailer involved a little deeper into your forecasting cycle, or committing to a higher share of ranging or promotional exposure.In Respect of the Individual – While this overall company blueprint is all important, we cannot overlook the need to maintain a dossier on the buyer and his or her personal make-up, to understand what might be motivating the person within. From immediate recognition for ‘getting the deal done’ to furthering of ongoing career prospects, we must take the time to understand the driving forces. Fostering a strong personal relationship with your buyer can add considerable weight to your negotiating position, but there is a need for some caution. In recent times, there has been plenty of negative publicity over the exchange of under-the-counter incentives involving a gratuity of some sort in return for favoured treatment. Often undisclosed, and inevitably prejudicial to the long-term relationship, these activities are a potential hazard, and many companies have taken the step of drawing a clear policy line between legitimate business development initiatives and blatant ‘payola’. However, there is no law against maintaining an honest and respectful social relationship with your trading partners. As long as both sides know and observe the rules, common sense can prevail.As a supplier, we are used to having sophisticated sales analyses to measure retailer performance, but we need to be aware that many retailers have similar planning tools. Certainly the larger multi-store operators and franchise groups regularly survey supplier performance and support even down to field level to confirm their central buying and merchandising decisions and to validate the numbers. It also fosters team commitment, by inviting store staff to take some ownership of the decision-making process. From the buyer’s point of view, it represents invaluable negotiating leverage, allowing them to use this feedback as a third-party ‘shield’ to protect their personal relationship with you while they dispassionately negotiate a whole raft of improvements in the deal, supposedly but not necessarily, based mainly on store input.This supplier benchmarking takes many forms, often involving up to twenty or so important parameters, from delivery to in-store representation. Suppliers are then judged against an aggregate or ‘best-in-class’ yardstick. Whenever you have the opportunity, you need to seek access to this sort of performance assessment. Although it is essentially an internal device, and the results are confidential by nature, selective feedback from the buyer can assist you to establish your overall competitiveness. Forming such a trusting bond calls for a very close relationship with the buyer, and can demand some sophisticated interpersonal skills, such as those of the parent/child relationship variety drawn from our knowledge of situational leadership. For example, even you happen to have market dominance over the retailer, a ‘paternal’ nurturing approach will always yield better mutual results than ‘big brother’ stand-over tactics. If you are a small supplier, a well-defined opportunity for growth within your big-brand retailer’s business or a promise of more dedicated support will get more consideration than a pathetic plea bargain to attract the sympathy vote.This means that there is no room for pumped-up egos, pretence, or grandstanding in this sort of relationship. It’s all about respect – openness, honesty, empathy, maturity – and it all starts with not only having developed a strong personal relationship with the individual, but having invested the time to compile and maintain an exhaustive blueprint of the reseller’s marketplace and current trading position.