BrainTrust Query: Finding Common Ground ... That Isn't at the Bottom of a Pit
Through a special arrangement, presented here for discussion is a summary of a current article from the Mark Heckman Consulting blog.
With so much money and many shoppers in play at U.S. supermarkets, it should be no surprise that the industry has traditionally been a magnet for huge investments from the consumer package goods (CPG) community. But there has always been something missing from brand and retailer interactions.
Diverting, slotting allowances, misuse of trade funds and dozens of other trade practices designed to solve short term financial needs have cluttered this ecosystem at the detriment of the consumer.
In his 1999 book, Agentry Agenda, Glen Terbeek detailed the "friction" created by brands and retailers in the grocery channel pipeline and the inefficiencies this friction fostered. Years ahead of his time, Mr. Terbeek understood that with new digital devices and systems, eventually consumers were going to seize the reins of this inefficient process and find other ways to acquire grocery products if bricks and mortar retailers and their brand partners didn't start playing "nice."
Having toiled on the retail side of this business for several decades, I can safely say that the retail version of not-so-nice involves a variety of practices couched in receiving as much brand money and content as possible from brand partners without providing the brands much in return. Stores almost always believe that their brands have more money to give them than they receive.
Playing not-so-nice for the brand community is exemplified as driving case sales even if the consumer demand of the product does not warrant it being in the system. This practice leads to ad hoc promotions which continue to "push" products into the system as opposed to being "pulled" by consumer demand. This mentality also leads to diverting and other short-term trade practices that distort and clutter the pipeline.
For sure, some have taken a longer view. They are likely trading data, working together to layer their collective promotional efforts, and are being upfront with one another every step of the way.
But if brands and retailers overall do not evolve to become better "agents" of the consumer, lurking around the corner are new players positioning themselves to assume command. This proverbial paradigm shift will not be easy. Mr. Terbeek sent out the first warning flare thirteen years ago with his book. Little has changed since. Together, brand and retailer incumbents have dug a pretty deep pit from which to climb out of. Systems, intelligence and the models now are in place to begin to create synergistic partnerships. Let's hope brands and retailers can soon find new common ground ... somewhere other than in the bottom of the pit.