Tesco’s confirmation this week that it has restructured its commercial arm did not feature any headline-grabbing changes in personnel.
But the move, which will see leadership roles split between sales managers and buying managers, is important as a signal of wider change in the grocery sector.
It has been clear to me for some time now through conversations with industry leaders that supermarkets are looking to develop more collaborative relationships with their suppliers.
For Tesco in particular, this new-found spirit of co-operation is a key part of its rehabilitation under Dave Lewis to make it a better company to do business with rather than the industry ogre feared by suppliers.
“Aldi and Lidl have long eschewed confrontational relationships between buyers and suppliers in favour of a more collaborative approach, recognising that insights shared and advice offered benefits both parties”
But it’s also another example of how influential the discounters’ business model has become in shaping the strategies of the multiples.
Aldi and Lidl have long eschewed confrontational relationships between buyers and suppliers in favour of a more collaborative approach, recognising that insights shared and advice offered benefits both parties.
Now the multiples are moving in the same direction. Under Tesco’s new model, driven by chief product officer Jason Tarry, sales managers will hold the main relationship with suppliers, leaving buyers free to negotiate the best deals.
It recognises that the skills needed to buy and sell product are very different and not always possessed by one individual.
Out with the old
For buyers used to a more adversarial approach, the transition may be difficult to make. Nobody likes change and the cut and thrust of negotiation is what attracted many to the profession in the first place.
However, a lot of ‘old school’ buyers have already left the Tesco business under Lewis and the next generation is being schooled in different, softer skills.
That’s not to say there is no place for hard-nosed negotiation; but that kind of tough conversation, while necessary, is no longer destined to be the defining feature of the retailer-supplier relationship.
In its recent interim results statement, Tesco said it had doubled volumes with around 100 key suppliers as it reported a 3.3% half-year increase in group sales.
This isn’t about Tesco going soft: it’s about building strategic relationships, mitigating inflationary pressures (suppliers generating larger volumes are more likely to accept thinner margins) and ensuring long-term security of supply.
All in all, it makes perfect business sense.