Putting Suppliers In The Buyer Value Chain

More and more food, grocery and consumer-goods retailers are finding success in using online channels to grow sales, and many are turning to their suppliers for help in developing mulitichannel initiatives. Many such merchants, however, still have much work to do to maximize their online potential, new research suggests.

Indeed, even as such merchants look to streamline the procurement and accounts-payable aspects of their relationships with suppliers, making the transaction process as efficient as possible, they also findings it increasingly important to work with them on sales strategy. And that’s especially true as retailers look to expand sales through omnichannel efforts, according to IGD Retail Analysis’ report “Trading Relationships in 2014/15.”

The report focuses mostly on suppliers helping B2C merchants drive sales, but there’s no reason suppliers couldn’t equally benefit from helping B2B sellers meet their goals, including through improved supply-chain efficiency.

“Retailers say suppliers are not working proactively to reduce costsin the supply chain and see this as the biggest opportunity for suppliers in this area,” IGD notes in the report.

Though suppliers lag retailers, both recognize the importance of multichannel efforts. “Whilst they face challenges, we detect more confidence as they get to grips with defining the channel and trying new initiatives,” the report notes. “Retailers are looking to suppliers to drive category growth, and both agree the number one ‘best-in-class’ supplier capability is launching innovation that contributes to growth of the category.”

The emphasis on price and promotion is the highest it’s been, reflecting the current trading climate, IGD notes in the report. “Broadening the discussion beyond price for now will be a challenge for both parties,” it said, noting the majority of retailers look to suppliers to become more structured about reviewing promotional effectivenessand embedding learning.

Suppliers should also be more creative with promotion proposals, according to the report. “Suppliers who have something to say about the categorywill be in a strong position to develop and strengthen trade relationships,” it states. “Effective category-management capability has been a constant enabler in developing trade relationships over the last 10 years.”

However, broadening the conversation beyond price and promotion is going to be difficult. To overcome such a hurdle, merchants should encourage suppliers to open up further areas to develop, according to the report. Key opportunities include understanding how shoppers respond to promotions and having a structured process to evaluate promotion activity. both before and after events, it notes.

Commenting about the report in a recent article in Essential Retail, Lisa Byfield-Green, IGD senior retail analyst, IGD anticipates online sales will grow faster than any other channel in the UK, to account for 8.3 percent of sales by 2019.

As shoppers embrace online shopping more rapidly, she said, grocers are looking for new ways to drive loyalty by making the experience faster, more convenient and more personal. Byfield-Green goes on to note recent trends that are contributing to increased sales, including a focus on mobile, click and collect, and the introduction of delivery-pass schemes.

Instead of adopting a one-size-fits-all strategy to eCommerce, suppliers are introducing differentiated strategies with each major customer, Byfield-Green said.

“Of those surveyed, 10 percent said that this was an established practice, and 24 percent said they were part way there, with these individual strategies for online forming part of the annual joint business-planning process with each retailer,” she said. “Working in this way allows suppliers to exploit various opportunities offered by different retailers, such as category strengths, online offers and events, and allows them to better target their online presence to different shopper demographics.”