The Grocer article on buyer negotiations on 5 April caught my attention. The feature was clearly written about farming and produce, but the generic headline suggested all buyer-supplier relations are changing to be more collaborative and proactive. Some branded suppliers found it misleading, as their dealings with retailers have certainly not become any easier.
Whilst there is no doubt the retail buyer role is evolving and will see major changes over the next five years, it is necessary to look category by category to draw conclusions on how it’s evolving and what to do about it.
Long-term commitments
A move to longer-term contacts and commitment is evident for sure, but this is largely across agriculture categories. That’s because of supply constraints and is entirely in line with standard predictable negotiation behaviours. The climate is changing, farmers are leaving the industry and cross-border shipments are facing challenges, so partnering up is the best way to ensure supply.
Longer-term partnering is also often seen in own-label relationships and can enable supplier investment in product development, but that’s nothing new – customer-dedicated factories existed 20 years ago, for example.
Retailers trading in largely branded categories need a very good reason to make a longer-term commitment, because they lose the ability to play one supplier off against another. Anyone who has done Sentinel Situational Negotiation training will know the common buying practice of supporting a retail category with one brand whilst turning the screw on another.
The practice hasn’t changed, but works best with three credible suppliers, so it’s not a tactic that limited-range retailers like the discounters use much. Their longer-term commitments to more exclusive category suppliers have paid dividends.
Category visions
The best long-term brand-retailer collaboration examples are seen when the supplier successfully sells and gains commitment to a joint category vision. Trends like climate and environment changes are built into such visions. AI for the most part has not yet caught up with the buyer role.
When it does we can expect to see real change, but in the meantime, data availability is growing fast and we are in a period when algorithms still get it wrong. Being data and tech-literate is necessary to transition to a strategic dialogue.
As buying roles have been reduced, spreading more products across fewer buyers, buyer responsibilities remain relatively unchanged but their actual responsibility is through the roof. The need for a joint approach has never been higher, but few suppliers seem able to capitalise on this.
Navigating the pressures of trading to gain such retailer commitment can be tricky.
First, choose the retailers with strategic thinking potential in your category. These will have both the skill and the will to work together. Then begin to transition them towards a new openly integrated way of working. Often this begins by making it clear that transactional working doesn’t benefit them.
Finally, selling the vision means selecting the killer insight, quantifying the medium-term gains and setting next steps together to achieve them. That’s when the real work starts.
David Sables, CEO of Sentinel Management Consultants
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