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.
Years ago when we shopped for a computer, our choice was to go to OfficeMax, Best Buy, Circuit City, and stores of that ilk, or Gateway, Dell and Radio Shack. Then there was the Costco’s, Sam’s Club and then all the other independent technology stores. They all did pretty much the same thing. You learned from a sign of features or you had a salesperson read to you off the sign of features. They gathered your purchase together and checked you out at the register and then sent you over to the checkout and wished you luck. Before you left, they may have given you an 800 number you could call for technical support, if you were lucky. Then you got home and began loading up all the software and registering everything on line. Apple computer was hardly a thought. They were that strange company that made good-looking things that were supposedly expensive. They were also the ones that had the following of some real gung-ho enthusiasts that many thought were bordering on being some sort of cult. Remember those days. Real computer geeks didn’t give Apple a second thought. After all you couldn’t add boards, and plug in and build your own tower. What was wrong with this company?Apple couldn’t get any respect or shelf space in many retail chains, and when they did, the displays were a shambles in the stores as a result of being neglected. The people that sold them gave them little respect and didn’t really understand what Apple was about or how to sell them. It was as if Apple had been marked with a large “A” painted across their products to brand them as less than acceptable. The attitude towards Apple reminded me of how adulterers were treated with a large “A” marked on them by the Puritans. Remember, The Scarlet Letter, with Demi Moore?Meanwhile everyone that could stick some circuit boards into a tower were selling virtually the same product. They all tried to add their own little gimmicks or special graphics boards to set themselves apart. Then the usual Microsoft software of the day was downloaded into them and they worked (some more smoothly than others). All came with the “fatal error” message from time to time. There was nothing special about any of them other than they continued to get faster as chip technology improved. Along with the advances came tens of thousands of known software bugs which required constant patches and updates…and that was before you dealt with the security and virus issues.There’s More Than Meets The Eye Apple has never been satisfied with their product or their service. They are constantly trying to raise the bar in the way their products work and interact with their customers. I often wonder where the industry would actually be today if Apple hadn’t been pushing the envelope. Once they opened their own stores, they took the same approach with their retail stores. And once again, those skeptics who don’t get Apple, predicted the failure of their stores within about a year or two. One more interesting aspect of all this, is the timing and growth of Apples’s retail stores. It seems to have coincided with the general death of chains selling computers such as Gateway, CompUSA, Circuit City, and many others during this same time period. Meanwhile, Apple quietly continued to work to make the technology-buying experience something that has been among the best consumer retail experiences around in any market.Those people who don’t get Apple are now saying the same things about their stores as they did their products i.e. “You’re paying for gimmicks and looks.” But there’s a lot more to the Apple retail experience than clean modern stores, bright lights and premiere retail locations with great glass staircases. If you don’t believe me, go build a store with a supersized glass walls, large heavy wood tables, and a great glass staircase and see if your sales become even a reasonable fraction of the $4,046 per square foot for the Apple Store (with online sales â¨it’s-$5,914)One Important LessonHere’s the big difference right here: “Apple understands that having satisfied customers isn’t good enough anymore. If you really want a booming business, you have to create raving fans.” If you are a retailer, you need to memorize that statement and if you don’t get Apple at all as an outsider, you must not understand that Apple lives and practices that philosophy and whoever you’re buying your computers and gadgets from probably doesn’t get it. That’s the dirty little secret!Consumers don’t care about electronic gadgetry for very long. You can only get so far on that. Ask Sony! They care what the products can do for them. Consumers also care a great deal about the experience they have to go through in order to purchase those products they need and want. Whether it’s a computer, a phone, a car or a boat, a lot of it comes down to the buying experience! You can buy Teddy bears anywhere? Why did Build-A-Bear become such a sensation? It’s the experience and the emotions! People feel good about what they do and what they buy at Apple. Apple makes it fun, and they remove the pressure and they make products that do what their supposed to do. Too often, the larger more substantial purchases, seem to come along with a clumsy and lengthy sales transaction. Anyone buy a car, some furniture or a boat lately?Should Apple Hard Core Fans Be Called Apple Cores?Just what are we talking about when we mention Apple hardcore fans? According to a new BBC documentary, tests on Apple hardcore customer advocates has found brain activity virtually the same as in religious worshipers. Using an MRI (magnetic resonance imaging) test, neuroscientists found when hardcore Apple fans are shown images of the company’s products, the same portions of their brain lights up in the same way as a person of faith does when shown religious imagery. The BBC in London reported that they witnessed something more like an evangelical prayer meeting than a chance to buy a phone or a laptop.” The documentary illustrated that a number of people at a recent store opening in London England had come from the U.S. and other locations around the world to wait in line for the doors to open. When the store finally opened, these fans found virtually the same things they could find at the Apple location that was closest to their homes. This actually reminds me of those who follow rock groups like The Rolling Stones, U2 and others around the country and the world, to hear the same music over and over again that they could have seen and heard in their own cities.A Different Retail ExperienceHave you ever been to one of these stores where the definition of customer service is, “we’ll try to ring you up once your ready to buy and if you just want to look we’ll hover over you like a vulture until we finally get a chance to answer a question and then we’ll read off the sign or information stickers about the product for you as if that is our purpose. Once you really do want help, it may take you 10 minutes or more to get someone’s attention. And then once we take your order, we’ll probably need to call a manager to come over and help the salesperson with the point-of-sale system.Apple is once again changing the way things are done, even at the retail store level. While they’ve been doing it for years, they are still “practicing what they preach” once again by offering, clean lines, a simple uncluttered environment, reliability, service, ease of use and listening to their customers so that they can run their retail business the same way they build their devices. They are also using technology and software to deliver the best customer experience possible. One innovation was deemphasizing the purchase itself, by eliminating the check-out line and the POS terminal. Their system was called “EasyPay” and it let salespeople wander the floor with wireless credit-card readers and ask, “Would you like to pay for that?” Even that system is already being improved and replaced. The Genius Bar, was another innovation. It is staffed by what Apple calls, “Creatives” who offer one-on-one training on everything from putting together your salute to Grandma, to how to be a deejay on your computer.Apple’s retail experience is one major reason why Apple has become “the force” in the industry, and that experience explains Apple’s success at attracting new customers who in the past would never have considered the Apple brand. Apple’s philosophy with its stores, seems to be to let customer explore and have fun and be self-sufficient on their own until and unless they need help, and then they’re promptly available for you in a multitude of ways to help and support you before, during and after the purchase.Do We Still Have Some Doubters Here?Well since they are the only computer manufacturer running double digit sales increases, they dominate the phone industry with the iPhone, they dominate the music industry with iPod and iTunes, and they dominate the computer pad business with the iPad, I am sincerely hoping you skeptics are not going to try and tell me that their retail success is just a coincidence too.It All Shows Up In Sales Per Square FootWhile it is hard to generalize about all retailers. Big box stores traditionally may generate $250 to $350 in sales per square foot per year, while a well run smaller store of approx. 2000 square feet may generate sales as high as $700 per square foot per year. Before Apples stores, Tiffany jewelers had the highest sales per square foot of any retailer in the country (currently $3070). Apple has now dwarfed the figure along with sales of all other retailers as well, including $1,776 for Coach – $880 for Best Buy. But this was all before they made the latest changes in their stores. I guess they weren’t satisfied… Is this company driven or what?Now Apple will be shifting the focus of it’s in-store classes, it has offered for years, in order to simplify and offer more tips and tricks for the iPad and iPhone, especially since these are closer to the devices of the future. Yes seminars on movie editing and digital photography will still be offered. The big changes inside the store there will now be iPad sales stations, or as Apple calls them, “smart signs” -You will be able to tap a button for help, and the picture of an available sales rep shows up on the iPad with a promise that he or she will be right over to assist you. Apple has also been quietly testing “personal setup” for customers in all its stores. Purchasers of Apples computers, the iPhone, iPod, iPad or Apple TV – could have the sales staff add their e-mail settings, set up an iTunes account and download favorite apps for them with very little effort. Apple is setting aside a dedicated, marked area in each store for this service.More Confirmation From Other RetailersNordstrom is taking a page from the Apple retail playbook and is rolling out a series of iPad touch based systems for their retail stores. While Nordstrom wrote the book on customer service and had a reputation for service, decades before Apple existed, they seem to want to stay at the cutting edge of customer service as well. As disclosed in an earlier article, other retailers are discovering more great ways to make use of this gorgeous piece of technology including Sears, K-Mart, J. C. Penney, Puma, Gap Inc., Amazon.com Inc., eBay Inc., Gilt Groupe, The Golf Warehouse, QVC, HSN Inc., Toys ‘R’ Us Inc., and Wine.com have jumped on board. Meanwhile, Apple has not been trying to emulate anyone else. Their attitude has simply been, “Why copy when you can create?”Last but not least, while I haven’t mentioned the heroic retail customer service stories that Apple is famous for, it’s funny you don’t seem to hear the same stories about Microsoft, Gateway, Dell, HP, or Sony. Maybe some of these stories have become more legend in some cases than fact (although I can tell you some pretty impressive personal stories myself) there really is an important accuracy and soul about these stories. Apple has taken the experience of buying something expensive and complicated to a new very high standard in retailing. And in the end, that leads to surpassing customer expectations and that leads to sky rocketing sales.At the very least one could certainly make a good argument that Apples retail stores have been a “core” reason in contributing to Apple’s success. Regardless Apple has succeeded because they give a lot of attention to a lot of details all aimed at more than satisfying the customer.15 Retail Lessons To Be Learned From AppleHave a passion for serving your customers, and put the customer at the center of what you do.Start with the philosophy that you are there first to solve problems for customers, NOT to sell them lots of stuff.Sell solutions or benefits. Sell what your products can do for your customer, rather than featuresSell great products and provide great service, and don’t worry about being the low price seller.Work to simplify the purchase process.Continually look for ways to improve your customer service.Understand the goal is not customer satisfaction, but customer loyalty.Many of Apples legends of customer advocates came as a result of a customer complaint or problem. How you take care of it is what generates great word of mouth!Work to understand all of your customers’ needs-some of which they may not even realize they have,” (one training manual says) â¨Keep any technology current that involves serving the customer better.Stand behind your products and/or serviceWhat can you do to make the buying experience fun and/or memorable?Be disciplined in all areas. Apple’s raining manual indicates that in six months time, if employees are 6 minutes late, three times or more, they can be dismissed.Work to control the customer experience to their benefit. (Apple has made painstaking efforts in this area.) For instance, in their training manual, Apple store technicians are even told specifically what to say to the customer using the right choice words when it comes to listening and understanding. Give more thought to your guiding principals as a business rather than policies. Policies were made to be broken.Note: Apple does not make use of sales quotas or commissions for their people.”I give [Apple] two years before they’re turning out the lights on a very painful and expensive mistake.”A 2001 prediction by David Goldstein, president of Channel Marketing, about Apple’s then newly launched retail stores