FD Buyer: Vendor Venting
Through a special arrangement, presented here for discussion
is a summary of a current article from Frozen & Dairy Buyer magazine.
In
the "Betty Buyer vs. Sammy Seller" battle each month on
the pages of Frozen & Dairy Buyer, folks get a chance to sound
off anonymously on their favorite gripes. In the August issue, several vendors
threw down the gauntlet, complaining of things retailers do, but shouldn’t.
During
demo or promotion times the buyers don’t purchase enough product to support
the effort. On many occasions we have found that buyers have no idea how
much product they need to satisfy the demand. For example we sell approximately
50 boxes during a demo. However, the buyer refused to order more than 30 boxes,
thus cutting the demo and sales short. This has been a constant thorn with demos
for us because it’s expensive to make demos due to heating and serving the product.
We always require two people to make it a success. — Vinnie Vendor
One of the major problems that we have is for stores to reorder product
when it’s out of stock. On many occasions the buyer just scans the price label
attached to the shelf to make reorders. However, we have found that on too
many occasions the label disappears. This has resulted in many lost sales opportunities
for us and the store. Another problem is continuity. For the same chain, our
product ends up in different sections. Some will have it in breakfast or natural
and organic or ethnic or appetizers. In one store we found it in seafood. — Lost
in the Shuffle
In many cases, promotions are not about selling product as much as
they are about generating ad revenues. Many retailers actually want a higher
margin to promote an item than what they get on everyday business. My idea
of a promo is to reward our existing customers and entice them to buy more
of my product than they normally would, and also to build new business by enticing
new customers to try our products. If we execute a heavy promo calendar and
at the end of the year haven’t
built any new business, what did we accomplish? A promo should be defined as
an opportunity to draw attention to your product in order to gain above average
sales and build new customers. Anything less than that is counterproductive
to both the retailer and the manufacturer. If there is a real partnership between
manufacturer and retailer, there should be consideration given to margin, and
frequency of promos. — Mind Your Margin
I’m amazed to still hear from some buyers in some pretty big
chains that they aren’t concerned with shrink since it isn’t charged
back to their department. Planograms don’t usually take into account
master case pack. From my perspective as a DSD operator, we can sell a few
pieces of a SKU if that’s all that is needed, so we control our own shrink,
but if a competitor is selling a master case of 12 and only six fit on the
shelf, then there is a problem of where to put the backstock. It usually ends
up somewhere else on the shelf and infringes or takes over the space of another
product. As a manufacturer, we have tried to make many of our master cases
more user friendly and go from 12 down to eight units per case. — The
DSD Doc
Discussion Questions: In your experience, which issue cited in the article
(i.e., demos, reorders, promotions, shrink) is the biggest headache for vendors?
What advice or comments might you offer on any of these?
Promotions are a frequent headache for vendors. Retailers want them to help differentiate their brand from others. Consumers like them because they offer price discounts. Vendors use them to increase trial and sale. You would think that this alignment of interest would ensure that promotions are presented well in-store, but this is often not the case. Brands and retailers need to work closely together to ensure that displays are properly set up and product is in stock.
For my client companies, I have developed the right dialog with retailers over the years to know and understand that retailers need “promotion funds” more than they really need “promotions.”
For many vendors the types of promotions that retailers do are irrelevant and have little value for certain types of brands. In fact for certain niche and specialty brands, the scans and discounts are actually counter-productive.
But retailers and vendors need to sit down once or twice each year and have an honest dialog about what really works best for all parties involved. We can find common ground and get it done!
Call it category management, call it shopper marketing, or just call it sales, the vendor should be providing clear guidance on the sales expectations of a given marketing action. The vendors should be getting this from marketing or marketing research at their own company. If the retailer is not paying attention, it’s the vendor who’s missed something–either they lack credibility, they’ve been wrong in the past, they are asking for too big an upfront incremental commitment, etc.
Generating the desired results from promotional activity has been a struggle for vendors for years. But I’m not sure retailers “cause” it. The fact that retailers treat the goals of maximizing:
1) unit sales,
2) retail revenue,
3) retail sales margin dollars and
4) net landed cost or (net generated revenue)
from any given promotional offer very differently should not be new news to any vendor.
The question is, why do vendors keep going back to retailers who’s goals are clearly not aligned with their own with promotion dollars?
As long as vendors continue to offer those retailers incentives to buy more product to meet their quarterly volume targets, hit their quotas and make their bonuses, nothing will change.
And as long as senior management of these vendors use the same old sales management tools and incentive systems, their own sales forces will not change this behavior–they would be cutting their own financial (and probably career) throats.
The only real answer for vendors lies in building brand value through innovation and consumer loyalty that goes beyond promoted price. The brands that will survive the current onslaught of private brands will be the ones that do 90% of their volume off the shelf–not the ones with 400% lifts in “incremental” promoted volume.
When a buyer (category manager) will not do something, there is a reason for it. They don’t believe the sellers pitch. They don’t understand the program. They don’t care due to another decision they made. Most importantly, the program does not support how the buyer is evaluated. Over the years I have seen many pitches that were rejected due to not being in the buyer’s personal best interest.
I have preached quit trying to sell the wrong deal. Unless the seller understands how the buyer is reviewed and compensated they are just throwing it against the wall. For example damage & unsalables are a profit center, plain and simple. The buyer does not care as it is not linked to their performance, so playing this card is useless. On the seller side unless the purchase makes profit sense, don’t do the deal. This is a hard one to accept, but simply moving unprofitable or less profitable cases is rarely the answer.
Failure to control “shrink” in the store generates larger problems than failing to properly support a promotion. If one looks at shrink as an operational failure, then one can look at failure to properly work promotional opportunities as an operational failure as well.
Operational failures have to be identified and rectified to achieve positive results in all areas of the store, to include promotions. A primary cause of shrink in many stores is “promotion” failure. Wrong signage, wrong pricing, over-ordered, heavy volume in back rooms, etc. Store management and the vendor representative have to be engaged and know what moves in the store and how fast it moves, promotions should be brought in and sold out within two weeks, displays should be built to move product. A solid promotion strategy will work wonders when all parties are actively pursuing the same goal.
I’m with Ben. The key word is “alignment.” I’ve seen major brand launches turn into tragedies when the vendor/brand assumed that a certain amount of time would be given for a new program, product or brand to “take” or that one retailer’s promotional plans, ordering patterns and appetites for particular brands or products should or would be the same as its nearest competitor (which the vendor may also define inaccurately).
Also, a product or program may be far less important to particular retailers’ or buyers’ bottom lines than it is for the vendor. Therefore, running low or running out, however devastating to the vendor, may be nothing more than a blip for the retailer.
All these issues are caused by suboptimal planning between retailers and manufacturers. Clearly “partnership” only goes so far whether under the guise of category management, shopper marketing or just good old-fashioned buying & selling. But, a rising tide lifts all boats and the retailers and manufacturers that are planning better together reduce these frustrations. That joint planning needs to be at several levels: long-term strategic alignment at the top of the house, medium-term category business planning, and short-term, store-level inventory management.