BrainTrust Query: Are Retailers Partnering With Brands or Biting the Hands That Fund Them?

Discussion
Feb 06, 2013

Through a special arrangement, presented here for discussion is a summary of a current article from the Mark Heckman Consulting blog.

Over the last twenty years, several industry movements have served as catalysts for "partnering" between retailers and suppliers. Category Management (CM), Efficient Consumer Response (ECR) and, more recently, Shopper Marketing-Path to Purchase (PTP) have led to co-authored and co-funded studies that generated books and presentations. But lasting partnerships among brands and retailers, not so much.

Reasons for less than optimal results abound. The truth is that on key cultural and process issues, brands and retailers are wired very differently. Retailers live in the moment. Brands often live in the future. Retailers adjust the components of their businesses hourly, while brands deliberate and strategize over months and years. Brands move managers and executives relatively quickly through their organization, while retailers tend to keep their team members in positions longer. Both feel they "own" the customer and are keenly anxious to extend that advantage. For these reasons and others, many retailers continue to "bite the hand" that funds them. In turn, brands continue to believe they represent a significant portion of the retailer’s life to form a direct-to-shopper relationship. Both practices are unwise and bode poorly for the future.

Technology and a sagging economy have given rise to a new variable, namely the empowered shopper. This shopper has seized control of the conversation and is quickly demanding better information, more relevant deals, and more efficient shopping alternatives that only the brand and the retailer together can deliver.

Loosely translated, retailers with data and new shopper touch points need insights and content from brands to cater to the insatiable appetite of the new empowered shopper. Sure, brands and retailers can try to go it alone, but given the short window of opportunity, new competitors pouring through that window each day, and the impatience of the shopper, it is hard for me to image anything but the power of a well formed partnership providing the best solutions for the new millennium.

As with all things that yield positive and timely results, there are requisites for success. Here are some:

  • Lasting partnerships are formed typically at the top of each organization. The commitment must be clear and consistent.
  • A good partnership has an accountable contact person on each side of the relationship who must answer the bell when things get bogged down or do not flow as expected.
  • Outcomes must be clearly communicated with success metrics known to all.
  • There must be equal or near-equal benefit from the relationship.
  • The partnership must grow and evolve, rather than stagnate and become mundane.

 

What are the keys to overcoming the diverging agendas of trading partners? Do you see any new approaches emerging — by way of technology or new processes — that promise to improve trade partnerships?

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12 Comments on "BrainTrust Query: Are Retailers Partnering With Brands or Biting the Hands That Fund Them?"


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David Biernbaum
Guest
9 years 3 months ago
The points made in this article are valid, and yet there are so many other reasons why retailers and branded manufacturers seem to struggle in the quest for partnership. The most valid point here is that retailers live in the present moment, while brands are always planning for the future. Another valid point is that partnerships are almost always formed at the top in both organizations, however, the spirit of the partnerships often fail to filter down to the category management level, with field sales. And when it does, it’s often more about who is funding for what rather than working together to build brands, productivity, traffic, and profits. At David Biernbaum & Associates LLC, we work very hard to bridge these gaps, and we encourage our manufactures (the brands) and retail executives, as well as retail category managers, to have a very honest conversation at least once or twice each year about how both parties can grow the business to each other’s mutual interest. I am a huge advocate of open discussion because most… Read more »
Dave Wendland
Guest
9 years 3 months ago

Data is certainly the lynchpin here. I personally believe that for too long, lip service has been given to data sharing. In today’s market the tide has shifted. Retailers—through the advent of their robust shopper loyalty programs—now hold more cards than ever. And for a successful trade partner relationship to exist, equal footing must be established. Brands have certain insights that retailers need to know while retailers know more about their shopper habits than ever. The time to get on the same page has never been more critical.

Two years ago I wrote a column on the topic of successful partnerships. It remains true today.

Max Goldberg
Guest
9 years 3 months ago

The key to a successful partnership is the ability to create a win-win situation. When this happens and is sustainable, both partners see benefit from the relationship.

The best opportunity for partnerships going forward is in management of data. Retailers need the data to drive sales and loyalty, but most are unwilling or hesitant to make the investment required to thoroughly mine the data. Brands would like to have access to the data to improve products. It would seem that both parties would gain from collaborating.

Dick Seesel
Guest
9 years 3 months ago

In a sense, the partnership between retailers and suppliers is more genuine than ever, if you judge based on data sharing and collaborative planning. But there is little doubt that retail-industry consolidation over the past 15 years has swung the balance of power toward retailers. With stores’ focus on quarterly results and private brands—rather than long-term strategic planning—it’s no wonder that most vendors have less influence over the “partnership” agenda than in the past.

Ed Rosenbaum
Guest
9 years 3 months ago

Commitment from the C-level is the start. But it has to be more than “Okay, do it” and move on. It has to be a watchful, committed eye on the program as it evolves.

Ben Ball
Guest
9 years 3 months ago

This is a never ending conundrum—and it has a very simple explanation. Retailers and brand owners/manufacturers have fundamentally different goals (unless they are vertically integrated a la Apple stores).

Brand owners want to sell more of their brand anywhere they can. Retailers want to sell more products out of their store no matter whose they are, or where they come from (except Private Label, of course). The twain shall never meet—for long.

So let’s stop pretending anyone wants a long-term “partnership” and instead maybe work on something achievable—short-term, purpose driven collaborations. One retailer and one brand coming together to do something mutually beneficial for a defined period of time. It’s not a partnership, but at least it can work. Best of all, the relationship gets easier to manage when everyone just calls it what it is.

About a hundred years ago I heard a retail leader at FMI “say it like it is.” That senior executive clearly stated from the podium “Safeway doesn’t need more partners—Safeway needs more profits.” At least everyone knew where they stood.

Ryan Mathews
Guest
9 years 3 months ago

In a world where differentiation is the key to sustainable success, it may be that retailers and brands are destined to be even more at odds than they were in the past.

Consumers care less and less about “channels” and more and more about getting the best, most convenient deals available.

This means it’s a war not of brand versus retail, but rather (manufacturer) brand against (retail) brand.

The question is, who owns the consumer relationship, Walmart or Coca-Cola?

David Zahn
Guest
9 years 3 months ago

Picking up on what Ben and Ryan have shared, the opportunity exists to move forward together—but under very clear parameters. The shopper does not care a whit about channels if they can get their needs met elsewhere equally or better.

The playing field is now in the area of shopping jobs and helping the shopper achieve some future capability, improve the lives of those being shopped for, upgrade capabilities, etc. Simply looking to repeat the same performance or meet yesterday’s needs is akin to generals fighting the last war.

The answer is contained in getting the retailer and manufacturer/brand to cooperatively create a future potential with the shopper and provide something that is as of yet unimagined or incapable of being achieved. Otherwise, it is going to be reduced to price, cost efficiencies, and arm’s length distance relationships.

Ed Dennis
Guest
Ed Dennis
9 years 3 months ago
There are many things in the works to allow the manufacturer more control of the consumer. One of the means being contemplated is the sale of ultra concentrated detergents via Amazon to consumers. This would allow the manufacturer to sell their branded product with containers for consumer use directly to the consumer. Imagine a 16 oz bottle with fill indicators. You put 15 3/4 oz of water and 1/4 oz of concentrate and instantly have the equivalent of a 16 oz bottle of Ultra Tide Liquid. The shipment would provide enough concentrate to make 64 or 128 oz of Ultra Tide. As the cost of shipment of liquids is very high due to weight, it is greatly reduced when the consumer supplies 98% of the liquid. Now as for overcoming diverging agendas, there is one overriding approach that will work. Have retailers concentrate on retailing and marketing their stores and the services they offer. Have the manufacturers concentrate on making the very best products at the very best price. Some retailers have accomplished this task… Read more »
Herb Sorensen, Ph.D.
Guest
9 years 3 months ago
Just looking at the structure and economics of the two industries, years ago I adopted the mantra, “The brands have all the money; and the retailers have all the power.” Of course, neither of these statements are absolutely true. The partnership has been strained for the past 100 years, but the massive growth of society (and retail) have been predominately driven by retailers, first A&P and now Walmart. This is not to denigrate the massive investments in product improvement, marketing and logistics on the brand side. Brands spend 24/7 looking for itches in society, and improving the scratching, while retailers spend 24/7 figuring out which of the itches most urgently need scratching—without ignoring all the other “little” itches. That’s fundamental “big head/long tail” marketing. Years ago when Ol’Roy (Walmart’s brand) became the #1 selling dog food in America, it was obvious that retailers would go after the brands’ honey pot. The picture would really be bleak for brands if it were not that they can range over the entire retail landscape, including online, mobile and… Read more »
Winston Weber
Guest
9 years 3 months ago
Industry dynamics such as retailer consolidation, retailer emphasis on differentiation and innovation, the application of new technologies and the growing importance of understanding the shopper and translating shopper insights into action has heightened the importance of both parties working together for mutual benefit. The irrefutable truth is that neither the retailer nor the supplier can or should go it alone. Neither party has all the data, analysis and insights. Neither party has all the knowledge, expertise and resources. Neither party controls all of the marketing levers to attract and convert consumers/shoppers. Except for a handful of major suppliers and retailers who appear to be getting it right, a vast majority still have a long way to go before they realize the full benefits of joint planning. Most joint planning processes are still focused on near term tactical opportunities in an industry environment that strongly suggests strategic alignment is a must if both parties are to produce the desired results. The alignment of business strategies and capabilities in a solutions oriented environment, with a focus on… Read more »
Ralph Jacobson
Guest
9 years 3 months ago

The promise of recent shopper insights tools available to both retailers and CPGers is a great incentive for enhanced collaboration. Each CPG CEO with whom I speak puts the end consumer at or near the top of their priority list.

Bottom line, both CPG and retail organizations have exactly the same focus: Drive consumer loyalty. If true collaboration can achieve some quick, measurable wins for both organizations, then other partnerships in supply chain, etc. will follow.

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