Being a retailer presents thorny business challenges at any time. But in this turbulent climate of risk and uncertainty, trust levels – even in venerable bastions of society – have been severely eroded.
Increasingly, retailers seem to be inundated by a torrent of new, often uncharted, complex situations. Yet we must sustain competitive prices, invest in attractive retail showrooms, retain properly remunerated and trained staff while preserving sales, profit and cash flow, in order to survive and prosper.
Understandably, in times of recession retailers often prod suppliers with a view to invoking improvements in terms. Sometimes such demands secure genuine gains. Not infrequently, however, they merely generate disharmony and even adverse media coverage.
So how should we approach the vexed question of optimising terms? How much more can be obtained from suppliers, and how important are strategic relationships?
Perhaps a trust lapse between a retailer and a key supplier might be compared to a marital breakdown. Often, when conciliatory services are called upon the counsellor discovers the seeds of destruction have been sewn over a lengthy period, whereas the external symptoms of trust failure are of relatively recent origin.
Partnership with our suppliers has to be a continuous process. First, we retailers should invest time in educating key suppliers in better understanding the needs and aspirations of our particular customer segment – market research on consumer durables indicates customers often rate the manufacturer’s product and the retailer’s service as equal constituents in arriving at a purchasing decision.
Conversely, we retailers also should strive to understand our suppliers. What are the strengths and weaknesses of their proposition? What capabilities do they have, and are there any areas in which retailer expertise might benefit them? What opportunities or threats do they face? What are their brand aspirations, and how do strategic partnerships with a retailer make sense?
To achieve such trust and understanding often requires multiple interfaces. Discussions with suppliers should not be the exclusive prerogative of the buying team. Finance, HR, marketing and supply chain often have much to contribute. Suppliers and retailers alike are affected by the recession. Everyone understands that pencils have to be sharpened, efficiencies squeezed out, and quality of customer service relentlessly pursued.
However, imposed initiatives can be perceived as unrealistic and might create more problems than they solve. Involving key suppliers in a continuous dialogue might allow other ideas to be explored quickly and more fully.
Of course, few suppliers would be comfortable with a single retailer taking all their output. Equally, no retailer can afford to have its prosperity entirely dependent on one supplier.
Terms and conditions of supply do need to be regularly reviewed against alternative options to sustain quality, price and service standards. Even so, active commitment to constructive partnerships offers a coherent way forward.
- Leo McKee is chief executive, BrightHouse