The balance of power has shifted away
Every retail business is in a constant state of transformation.
Bennie spoke about the perceived ‘plight’ of the newsagent for instance. The subsequent commentary highlighted the fact that whilst it is a sector in transformation, there is nothing really unique about the challenges they face – all retailers have to constantly reinvent their business models.
I have been engaged in this sector for a long time now – directly with newsagents/ marketing groups as well as with suppliers in this channel and have delivered many success stories. By and large, most retailers faced with change (including newsagents) KNOW they have to change, but they don’t know HOW to change. (I don’t agree with Stuart Bennie that the majority - 80% - don’t want to change.)
Successful transformation is driven by people. During the challenge of the transformation, we must resolve the role of each stakeholder and possibly more importantly, identify which stakeholder is critical to our future success.
The key stakeholders in the typical retail business are customer, suppliers, staff and of course the owners/investors. They are all important in different ways for different things.
If pressed, most people say the customer is the most important. I have written about it and I have spoken about it too. Arguably, it is the staff who must do the servicing of the customer’ needs so they may be considered the most important. Of course, without an investor you don’t have a business.
But since Ganador’s business focus is working through the whole retail supply chain to get better outcomes on the shopfloor, we work both sides of the fence. From this experience I can unequivocally say to all retailers reading this that you need to think very differently about your suppliers:
What if your supplier is your real customer?
What if the consumer is simply a resource/asset that retailer can ‘sell’ to brand suppliers?
What if the retailer’s job is to create an environment that attracts potential consumers to the store in order to satisfy the needs of its ‘real customers – the supplier?
Is a retail brand not simply a meta-brand? (A brand of brands.)
Is a student a ‘product’ of a university that is ‘bought’ by society or industry; or is a student a customers of the university simply buying educational services?
Similarly, the retail supply chain needs to evaluate its philosophy towards the various stakeholders.
Historically, access to the retail distribution network was the only option for suppliers/brands, and retailers could use this threat of responding to the needs of consumers to vary your offering to manipulate suppliers. Is it any surprise that the retail brands who are suffering the most have traditionally been the most powerful?
The larger retailers introduced house brands (private labels) to further weaken the position of suppliers.
Many retailers, including smaller retailers, have dismissive attitudes towards supplier representatives.
Times have changed: The web has enabled the creation of an alternative channel (directly) to the consumer for the supplier.
Retailers who have wielded their power (of distribution and access to the consumer) may now be paying the price as their ‘customers’ (the suppliers) AND their consumers (their assets) are connecting directly.
This channel disruption demands price convergence (between offline and online) and retailers who are stuck with legacy infrastructure (including rents) must now secure better prices from the suppliers in order to remain competitive; ironically at a time when relationships are at a low point.
The balance of power is shifting - possibly to the extent that you have to consider your supplier as your real customer.
All stakeholders are important, but at this particular juncture the balance of power in the retail supply chain is being redressed in favour of a long-neglected stakeholder: the supplier. This means that retailers must adopt a different mindset towards their suppliers. (And so should some suppliers, but that is another story.)
How do you treat suppliers?
Has it changed in recent times?
What role will suppliers play in your success at the requisite retail transformation?
Every retailer has a marketing strategy, a pricing strategy etc.
What about a supplier engagement strategy?
I would love to hear your thoughts.