Or real opportunities ahead for those that can stand the reality of a hot kitchen…
Well, eight years on from the global financial crisis and many of us are still here… In 2008, we cautioned that interest rates would continue to fall and even approach 1%, yet last week the Bank of England lowered the rate to 0.25% with barely a headline…
While other suppliers are still awaiting a return to some semblance of ‘normal’ or are ploughing on regardless of market indicators to the contrary, we continue to believe that there are real trade opportunities available for those suppliers that take a realistic view of risk & reward and act now on the basis that things will improve eventually…
Essentially, the current ‘cut-back’ uncertainty and lack of predictability means less competition. This means more talent is available for those suppliers willing to take a forward view and seek profit opportunities amidst the financial uncertainty. For NAMs it means distilling the job down to the basic business management of a major account.
In other words, a unique opportunity has emerged for those suppliers and NAMs that are willing to acknowledge and build upon the new market realities, reposition their competitive differences and demonstrate their value to key customers, financially.
However, in order to realise and optimise the new opportunities, suppliers need to make a fully objective and realistic assessment of their own and competitors’ relative appetites for risk in times of unprecedented uncertainty. In other words, it is time to decide whether the company and its people are risk-seeking, risk-neutral or risk-averse, and how this compares with the competition in the category.
In exploring available opportunities, suppliers will be subject to varying degrees of risk in terms of impact upon the business and chance of occurrence. It is therefore necessary to reduce all business process to financial measures of investment and return in a cash-driven market environment. This will make it easier to communicate the size of risk – and opportunity – to others in the business. It will also enable more rapid response to market changes in terms of customer demands and competitor initiatives without jeopardising overall profitability. Again, constant use of financial measures will enable the supplier to maintain and work within an acceptable level of risk.
All of which will have to be factored into highly realistic forecasts of achievable levels of ROCE, the ultimate business measure in a zero-sum game, where any growth is at the expense of the competition.
Despite current uncertainties, it can be taken for granted that shoppers and retailers will continue to buy and sell, modifying their behaviour to reflect their perceptions of need-changes in the current post-Brexit climate.
Moreover, given that each supplier has different profiles in terms of consumers and shoppers, brand-portfolios and customer-portfolios, terms and conditions, and especially financial impact upon individual customers’ profitability, so too will their relative appeal to each customer be different, unique and new, compared with the competition. In other words, we now operate in the age of tailor-making…
The real opportunities for suppliers lie in the ability to capitalise upon these new differences in appeal to the customer, and demonstrate their resulting impact upon the profitability of the customer’s business.
In addition, suppliers are currently dealing with multiples under increasing financial pressure who will try to transfer even more business risk to their suppliers, especially via increased demands for credit and trade funding. Given that trade credit is interest-free and trade funding can reach levels of up to 20% of sales to retailers, it can be appreciated that these moves will prove increasingly tempting to major customers, as the economy continues to flat-line. Moreover, suppliers should also anticipate increases in levels of deductions, currently between 3% and 8% of suppliers’ turnover. These demands need to be resisted, and attempts should be made to ensure a fair share of respective business risk, for companies supposed to be operating as ‘equal’ trade partners.
Finally, it might be worth bearing in mind that the money-management and return-on-trade-investment disciplines developed now will not only help to optimise available resources in the current climate but will add to the supplier’s momentum, as the recession inevitably eases and ‘normal’ growth resumes.
On the other hand, a prolonged retro-view will help in avoiding the need, or opportunity, to change, until it no longer matters… In the meantime, realistic optimism is for those NAMs that are well aware of risks, but deep down believe that things are going to get better…(Godin)