The retail supply chain is broken and I am sadly observing systemic failure in the retail supply chain,. The symptoms are as follows:
- Landlords may tell retailers that their stock is not what the market wants and the customers are simply responding to the fact that they can get what they really want somewhere else. They argue that the customer service levels are not good enough and that the presentation is not up to standard.
- Franchisors will berate Franchisees for not adhering to the Operations Manual and for failure to engage the customer in the right way; not serve the hot dog the way it was meant be served or that the form wasn’t completed on time. It’s a constant challenge to get people to buy into the ‘system’.
- Retailers (in shopping centres) on the other hand always blame centre management for lack of traffic and too much competition in their category.
- Franchisees always think their franchise is a little bit different and deserves to be the exception in a dozen little ways.
Who is right and who is wrong? The short answer is they are all wrong – about each other – and this is the cause of the systemic failures in the supply chain.
We often have to spend a great deal of time on facilitating discussions to help each party understand the other’s point of view.
- We have to help the landlord understand that the reason why the retailer is not engaging with centre management is that they rightfully don’t have respect for centre management. Just like customers punish the retailer with non-attendance when the retailer does not have what they want, similarly if centre management is not adding value to the retailers’ lives, they cannot expect any engagement from the retailer.
- We have to make sure the retailer understands the landlord is not a financial institution and that they cannot use them subsidise cashflow shortfalls. They must understand that the centre teams can drag customers to the centre but not into their store.
- We have to make sure the franchisee understands the Franchisor cannot guarantee success and that the ‘system’ is missing one important ingredient and that is the franchisees commitment and hard work. And of course that territories are not as different as they’d like to believe.
- We have to make sure the franchisor understands the franchisee will not buy into the consistency message if the Franchisor treats different franchisees differently because that undermines their own demand for consistency. (If you demand consistency, you have to live it yourself.)
‘While two dogs are fighting for a bone, a third runs away with it’; so the old saying goes. And it is true here too.
Whilst there is a tussle for power and control between landlord and retailer, between franchisor and franchisee, the customer (the third dog) runs away with it.
None of the business entities in the retail supply chain have much power anymore. And whatever power you exert over another party is tenuous and will fade anyway. The consumer is empowered. They have a little device in their pocket called a Smartphone, and that means they can any information and increasingly any product from anywhere in the world at any time they please.
A collaborative supply chain is a strong supply chain.
But, I am not optimistic:
- How many Shopping Centre Landlords have an actual, active and successful Retailer Engagement Strategy?
- How many Manufacturers have collaborative, transparent Trade Marketing Strategy that goes beyond mere promotion and equips and empowers their retail network?
- How many Franchisors invest in the development of their network beyond the minimum compliance at the ‘system’ level?
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