As margins come under increasing pressure for both retailers and suppliers, it has become clear to both parties that working together is no longer a nice to have, but an essential way to survive the fierce competition. In this article, Martin Wood from IRI explains why it is wise for retailers to have better supplier collaboration.
It’s not gone without notice that retailers are changing their behaviour due to increased scrutiny from the media and the threat of fines ordered by a tenacious Grocery Adjudicator with many announcing new ways to engage with suppliers. But far from being just about compliance, the change is mainly driven by the fact that retailers now recognise that their suppliers are closer to data on customer behaviour than they are – and this is especially true in the grocery sector. Many retailers are now accepting the fact that they have taken too much of a broad brush in their approach to finding insight and authority on key categories.
Consumers have evolved to become harder to find, engage and please as it is much easier to research for information via a simple internet search. Retailers often have an advantage of being physically closer to their customers, and they are constantly searching for the best insight into consumer behaviour and shopping patterns.
On the other hand, suppliers have often spent years building strategic, analytical and consumer-centric organisations, in order to remain competitive against other brands for shelf space. As a result, they have granular and robust insights on consumer behaviour especially in specific categories. And by the same token, they are also more adept at conducting detailed analytics in order to execute marketing and brand innovation. These analytics become invaluable insights for retailers to identify the best offers to customers.
Learn how to work together
It might come as a surprise that the natural collaboration between retailers and manufacturers doesn’t come easy. We have seen some organisations improve business results significantly simply by sharing information and developing joint business strategies. However, some retailers and manufacturers have really struggled to do so.
Ultimately, retailers and manufacturers are working towards the same goals – to increase loyalty and sales. Collaboration makes reaching these goals much easier. The key is to share the data and turn it into actionable customer insights such as customer segments, promotional analytics and offer redemptions.
In an ideal partnership, retailers are in the best position to listen to customers’ demands and respond to them in a timely manner. On the other hand, manufacturers can leverage their extensive knowledge of brands and categories by working with retailers to analyse and derive conclusions that can be used as the basis for all sorts of decisions including finding the optimum combination of product lines.
A good recent example is Costco’s Collaborative Retail Exchange (CRX), a new collaborative platform that was implemented by IRI. It gives Costco’s suppliers in the UK daily point-of-sale (POS) and inventory information directly from its data warehouse. It means that they no longer have to rely on disparate data sources to gather information. Suppliers can use this platform to obtain a full view of Costco’s global business.
With historical and daily category tracking, suppliers can also benchmark their performance against the rest of the category as well as all releasable sub-categories and segments. This will help them easily identify category trends, track their category performance and gain valuable insight into the competitive landscape.
Technology as an enabler
Thanks to the advances in technology, we can now make things easier for collaboration to take place. Controls over privacy and data security address the concerns that many organisations had.
There is increasing evidence of collaboration between retailers and their suppliers. Costco, M&S and One Stop are investing in collaborative exchanges that make it easier for both parties to share the same information. Enhanced data and technology will make it even easier for retailers’ valued manufacturer community to obtain specific, real-time information about their business around the globe.
We can’t wait to see what the collaboration will bring to everyone in the food chain from manufacturers to retailers and shoppers.