Making Every Sale Count, Even Via the Discounters…

By Brian Moore, Global Retail Consultant and CEO of EMR-NAMNEWS

With markets continuing to flat-line everywhere, globally and locally, it is imperative that we make every sale count. This means operating with two complementary strategies: develop any growth opportunities, and optimise current channels.

Developing growth channels

Given that the growth channels are discounters, online and local convenience, suppliers need clear strategies for each.  It has to be taken for granted that suppliers and their trade partners are fully committed to optimising online access to the consumer, using Amazon 1-click, 100% availability, rapid response, and no-quibble refunds as entry level standards for the channel…

In addition, with consumers buying smaller, faster, closer, and more frequently, it hopefully goes without saying that suppliers are finding efficient ways of meeting demands for more convenient shopping?

However, in the case of discounter growth, Aldi and Lidl represent one of the more neglected and probably the biggest opportunity-channels for branded suppliers, other than via ad hoc supply of anchor brands for a handful of products and despite the fact that most discounter growth comes at the expense of brands.

Given the rate of growth of the discounters, it was inevitable that major suppliers would eventually begin to find ways of working with Aldi and Lidl in order to compensate for the sluggish growth of traditional retailers…

In fact, a new report by Miloš Ryba at the IGD, gives details of branded manufacturers such as Nestlé, P&G and Unilever’s increasing willingness to feature their products on discounters’ shelves in Aldi Germany over the past 12 months.

The key message for all branded suppliers has to be the need to reassess trade and channel strategies in order to define a non-compromising role for their brands in discounter outlets that will otherwise continue to grow at the expense of brands.  And if the big guys are managing the transition, it must be possible for others…

However, in case the above insight causes too many brands to try to open up ongoing trading relationships with the discounters, it should be borne in mind that any significant rebalancing of their brand/surrogate brand-mix coupled with expansion of their product offering could cause Aldi and Lidl to dilute their profitability, thus compromising the very growth that makes them appeal as new channels.

For instance, thinking back to the relative simplicity of the 800 SKU model, based primarily on surrogate label with a handful of anchor brands, coupled with low staffing levels and small outlets, it was relatively easy for discounters to beat the multiples on price and yet make adequate profits.

At that time, it was cost-effective for the discounters to approach the multiples’ suppliers of private label, and piggy-back on key lines, without picking up origination and compliance costs. However, now that the discounters are extending their ranges via more creative product introductions, it follows that they will need to employ more expertise in terms of more support staff in R&D, Tech, and QC, apart from picking up the burden of the usual ‘9 out of 10’ failure rate…

Furthermore, as they continue to grow share, consumer media will highlight any product defects, thus triggering the ‘tell a friend’ mechanism – ‘if I like it, I tell one friend, disappoint me and I tell 10 friends…’  All adding further to the compliance overhead…

Given the fact that the multiples continue to keep pressure on shelf prices, it follows that the discounters’ additional costs will dilute their bottom line performance.

Incidentally, perhaps this will become an opportunity for an entrepreneur to re-discover the original ‘hard discount’ formula, and launch a competitor to Aldi & Lidl?

Leaving us all to ponder on where the legal responsibility for damage to consumers can be laid: retailer or O/L manufacturer?

Optimising current channels

By comparison, attempting to optimise current, non-growth channels may seem mundane, given the excitement of the ‘new’, but in the current climate, every little helps.  What this means in practice is that we cannot risk taking anything for granted.

This means working all the way back from anticipated consumer demand, through the demand-supply chain, via compliance with agreed facings, 100% on-shelf and system availability, zero-defect delivery, servicing all commitments to aisle-based initiatives, fulfilling latest consumer need, better than available alternatives, and seeking signs of any stock build-up/short-falls that might ultimately compromise brand profitability…

In practice, this means NAMs need to re-take responsibility for every stage of the need-satisfaction process, albeit with little or no designated authority for same.

Welcome back to the future of National Account Management…

See KamTips: How To Make Every Sale Count, And Manage Compromise, when every little helps…

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