How are manufacturers failing retailers?


Through a special arrangement, presented here for discussion is a summary of a current article from Frozen & Dairy Buyer magazine.
Outside of rock-bottom prices, what can manufacturers do to help their retailer partners — and, by extension, themselves — succeed? For starters, they can stop treating every chain they supply the same way.
Whether through a unique value proposition, assortment, customer service or a myriad of other variables, differentiation has become a critical retailer strategy. Bob Shaw, president of Concentric Marketing, reports that a shockingly high number of manufacturers spend a tremendous amount of time and effort trying to shove the same products and programs down every retailer’s throat, regardless of whether or not it makes sense in a particular chain’s set.
Moreover, with retailers focused on growing the category, manufacturers should forget about presenting items or strategies that merely swap share between brands.
Added Cadent business analyst Maxwell Legocki, “Establishing your brand as a leader in consumer insights — coupled with both product innovation and strategy — can give you the staying power required to achieve long-term growth.”
While the largest manufacturers are often praised for providing category insights (knowledge doesn’t come cheap), small manufacturers may have first-hand knowledge of some of the fastest-growing niche segments.
One of retailers’ biggest complaints about manufacturers is their failure to accurately predict demand. “Good suppliers share insights that help retailers improve product forecasts and make smarter decisions around purchase volumes,” says Ken Morris, principal at Boston Retail Partners and a RetailWire BrainTrust panelist. “They also help retailers minimize out-of-stocks with insights into delivery schedules, the impact of the manufacturer’s advertising and promotions calendar and enhanced forecasting data.”
Manufacturers also often develop pricing strategies that are non-collaborative and one-sided. Said Mr. Legocki, “Manufacturers underestimate just how much retailers need to understand the ‘why’ behind the pricing.”
Buyers are also bothered by “a constant stream” of new item introductions and line extensions, often without adequate consumer support or even testing, as well as the little forewarnings that often precede package changes — box to bag, smaller or larger size, new dimensions, etc.
On the positive side, while the balance of power has shifted in their favor, retailers seem more willing to support strong partners in the increasingly competitive marketplace.
DISCUSSION QUESTIONS: What shifts in the retail/manufacturer relationship are suppliers downplaying or failing to recognize? Of the retailer complaints listed in the article, which is most important for suppliers to address?
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23 Comments on "How are manufacturers failing retailers?"
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President, Protonik
Retailers need strong manufacturers and manufacturers need strong retailers. When one party becomes weaker, the entire channel suffers.
And the primary area where manufacturers are failing is in spending the money needed to create awareness of their product and brand value — awareness that increases store traffic and pays off for both retailers and manufacturers.
However, the incredible pressure to discount from retailers also forces such low margins on the manufacturer that they can’t afford the investment in advertising needed to create demand for the value they bring.
We’ve had tremendous success solving the problem when retailers and manufacturers team up with commitments which make it possible to afford the significant advertising investment needed to create the mass-market perception of value.
Unfortunately, these team situations are rare. And that leaves new products supported by such small communication budgets that they have no choice but to hope for viral success — but they’d be better off standing in Grand Central Station whispering their new product value than trusting in the viral hope.
SVP, Strategy & Insight, Profitero
The most collaborative manufacturers are approaching retailers as partners.
For decades, leading suppliers have focused on solving problems with retailers that transcend the supplier’s portfolio of brands and products (focusing on growing and supporting categories, departments, store formats and corporate initiatives).
The modern strategic supplier is consulting and supporting retailers in all aspects of their business — including in lofty areas like their business model and how to adapt to a changing shopper and changing competitive landscape.
These retailers and suppliers recognize their co-dependence and shared destinies amid rising stakes.
Advisor, MyAlerts
Here’s the problem with what’s being proposed in terms of better data sharing and communications between the manufacturers and retailers: no knowledge of the future purchasing trends and plans of the consumer. We are in an age where it’s often said the consumer is in control. Yet the industry still is merely guessing at what the consumer wants and will do in the future, despite their tech tools.
Sixteen years ago Seth Godin coined the term Permission Marketing and proposed simply asking consumers for consent to market to them based on their future interests and plans. I predict 2017 will be the year when we see this new vital dataset emerging at scale, and many of these issues we see today will start to disappear.
President, Integrated Marketing Solutions
Simply put, the greatest miss by suppliers is the fact that omnichannel is the new normal.
The product-centric selling of the past is no longer working or profitable for retailers. Retailers can’t afford to just buy a “product line.” They need long tail strategies, curated assortments by store, drop ship for fulfillment to homes and rapid replenishment for click and collect. And the list goes on and on.
In today’s omnichannel world retailers need more than “suppliers of products.” They require strategic partners who can meet omnichannel consumer demands of “anytime and everywhere.”
Managing Director, StoreStream Metrics, LLC
Regardless of the contractual agreements in place, retailing is a consignment business. Integrating new technologies and their associated business processes, manufacturers, retailers and shoppers alike will benefit from acknowledging this reality. By monitoring and tracking each product from manufacturing (even sub-assemblies in some situations) all the way through to the retail shelf and beyond manufacturers can maintain a near real-time visibility on every item in the distribution and supply chain. This allows the manufacturer to manage production and out-of-stocks in order to provide their customers a frictionless in-store shopping experience. The retailer pays for the items sold, the supplier knows immediately what items are selling in specific markets and locations and can maintain production and stocks accordingly. Retailers such as Macy’s and Walmart already are establishing the foundation and infrastructure for this very process. I believe this process IS the future of brick-and-mortar retail.
President, Global Collaborations, Inc.
If manufacturers and retailers really collaborated, they would be focusing on their joint consumers. Understanding joint consumers would have each team facing a specific group of consumers that is different for each team — not only on the company level but also at the store level. If that were the case, assortments would better match what consumers want and predicting demand would be more successful.
Founder and CEO, Segmentis
Strategy Architect – Digital Place-based Media
An emphasis on production is expected of manufacturers, but with production capacity far exceeding consumer demand for every product being made, manufacturing success is linked to retail success. Producers that generate brand equity for their label or products and communicate product value serve themselves, retailers and consumers best. Point of purchase messaging (beyond the product label) is essential to influencing selection decisions that are emotion-based. Retail will move to its next plateau as manufacturers assume more ownership for product promotion in the realization that retailers have little loyalty to manufacturer success, as their business value is foot traffic, shelf space and transaction processing.
Managing Partner, Advanced Simulations
We are at the point in our research capabilities that we should be able to forecast well the impact of promotions — I’m surprised that this remains an issue. There is no reason to run short of product, from the supplier’s perspective. I’m also surprised any retail buyer would even consider a new product or a line extension without some research showing its impact on the brand and the category.
Managing Director, RAM Communications
Even with all the data collected on shopping behavior, or perhaps because they’re just swimming in the data, there is still a fundamental disconnect between many manufacturer marketers and front-line retail managers. As much as those marketers, who typically sit in offices in New York, Chicago and LA, try to predict what what works to create demand at retail, their viewpoint is jaded by how and where they live. How much can a 35-year-old hipster with a beard and tight pants living in Brooklyn really empathize with a 42-year-old housewife with three kids living in a suburb of St. Louis?
As for the most critical complaints, if retailers don’t have the product they can’t sell it. Manufacturers need to do everything possible to ensure in-stock positions for all products supplied at all times, especially those on promotion.
Founder, CEO & Author, HeadCount Corporation
Given the nature of the relationship, I believe there will always be some tension between retailers and manufacturers. I agree that the retailer complaints expressed in the article are indeed valid, but the suggestion that manufacturers have their act together does not square with my personal experience. Many manufacturers, except the largest, often didn’t have a good understanding of their demand or provide meaningful category insight — they often asked us, the retailer, for market insight.
The best manufacturers viewed our relationship as a partnership and shared information on potential demand, pricing strategy, etc. Most importantly, they were candid with what they didn’t know. I appreciated that. The fact is, retailers still decide which manufacturers they will work with or will not — manufacturers aren’t perfect, and retailers can do themselves a favor by being very clear about what they expect from the relationship.
Founder, CEO, Black Monk Consulting
Principal, Anne Howe Associates
Retailers and manufacturers would be ahead of the game if they focused on a true and two-way relationship with core shoppers of each retail chain. The days of mass influence are about over, as shoppers today expect that if “you know me and I give you information about what I want, then you should respond and reach out to me accordingly.”
Retailers and brands working together to react to and deliver upon the expectation of personalization will have more success together than individually. Doing this right takes a village made up of folks from multiple disciplines from both camps. It’s most successful when a neutral lead (agency or consultant) can help negotiate hurdles and keep the team focused on the needs, wants and expectations of the shopper!
Chief Amazement Officer, Shepard Presentations, LLC
Perhaps the relationship should move the manufacturer from being a supplier to becoming a partner. Two heads are better than one. Synergy plays a role here where the sum of the two (manufacturer and retailer) is greater than the parts. When a manufacturer can share knowledge that is helpful to the retailer. It may translate into more sales, and the retailer will (at least should) reciprocate with bigger orders.
One of my favorite examples of this, while not necessarily a retail example, is when Ford asks its suppliers to cut prices. But it did so collaboratively. In other words, there was an effort to work together so that the price reduction didn’t reduce the supplier’s margins. They came up with creative solutions to save money. And the same can happen for manufacturers and retailers. It doesn’t have to be price. It can be anything that the two sides collaborate on to create better results.
Scientific Advisor Kantar Retail; Adjunct Ehrenberg-Bass; Shopper Scientist LLC
President, founder and CEO Interactive Edge
Obviously this discussion has hit a nerve and rightfully so. We, as an industry, have been talking true collaboration forever and change has certainly not been happening fast enough for both sides. There are many things that need attention and my fellow BrainTrust contributors have already addressed many of them.
I believe the most important change that will lead to action is to strategically work together to grow the category and not just your brands. The buyer will not and should not listen to manufacturers that talk “partnership” but only push their brands instead of helping the buyer grow the category. If you work to grow the category for the retailer, the rest will take care of itself. There needs to be a longer-term view. Furthermore, until senior management from both the manufacturer and the retailer allow this longer-term view, we will be talking about this same issue year after year. Quarterly results do not make for a sustainable growth strategy.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Independent Board Member, Investor and Startup Advisor
Global Retail & CPG Sales Strategist, IBM
The failure to accurately predict demand is a perennial challenge that both manufacturers and retailers need to address together. And we’re seeing that happen with innovative partnerships today. These organizations are looking introspectively to discover the “dark” data within their own systems that can help identify demand signals. They are also leveraging external, unstructured data sources like weather, local events, news, social chatter and other forces that affect demand. I believe the time is now to put this challenge in its place once and for all. Again, this all stems from effective collaboration. Easier said than done, however it IS possible, as is being proven in the marketplace.
Founder & CEO, Dextro Analytics
It is less about what one side is doing vs. other, but more how both can work together. Data sharing between them is one of the biggest pain points. The single most important thing we have been encouraging retailers and manufacturers to do is to work together for co-creating insights around how to grow a category and not just focus on the SKUs.
Founding Partner, Merchandising Metrics
Liked!
Joint innovation between manufacturer and retailer. Sounds like a conference and standards opportunity! Who is the keynote?