Given the global market turmoil, and the structural changes currently taking place in UK retail – and especially when all else has failed – it may be useful for NAMs to try switching their approach from selling to buying, helping the buyer buy…
In practice, this seemingly small step in fact represents a fundamental change in perspective for classic NAMs. Essentially, in the old days – before the world turned upside down in 2008 – it was sufficient for NAMs, equipped with ‘trade-funding’ budgets representing 20% of sales turnover to simply extol the virtues of the brand and hand over the money to a buyer driven by gross margin and sales increment, with little incentive to debase the relationship by making reference to compliance…
Think of the current market conditions from the buyer’s perspective… A world of certainties is now challenged by unprecedented demand downturns, and a growing sense that large space retailing is becoming redundant as a result of challenges from the twin pressures of cost of travel and the switch to online. Given that most retailers own their large space outlets, and such assets cannot easily be sold or re-engineered to accommodate new consumer needs, it is becoming increasingly difficult for retailers to simply trade their way out of falling demand, at any price.
In other words, retailers are locked into inflexible assets and diminishing profitability in a world changing around them…. In addition, apart from falling sales driving down profits, and with it the value of their share options, buyers cannot be unaffected by news of middle and senior management redundancies as major retailers attempt to restructure in response to market change…
For a buyer, a supplier represents retail sales, gross margin, free credit, trade funding and potential deductions, with an appeal that is relative to, and must compete with offers from other suppliers.
To help a buyer buy, it is now necessary for a NAM to relate to the buyer’s top-of-mind concerns. In other words, in flatline markets with little opportunity for raising prices, and difficulties in holding down costs, retail gross and net margins are being compromised. In addition, with the major multiples losing share to discounters and online channels, buyers are being forced to buy in ways that drive ROCE, a combination of net margin and capital rotation, in order to rebuild share prices and thus their personal remuneration…
Buyers are having to develop an assortment that matches the need of the savvy consumer in terms of demonstrable value for money, better than alternative retailers. As always in flatline markets, competitive appeal becomes a key driver in that any growth comes at the expense of competitors…
As such, buyer and NAM need to be realistic about how the supplier’s brand measures up to alternatives in terms of the 4Ps: Product in terms of performance, Prices & Terms, Presentation, and Place – i.e. availability, all matched to consumer need, and better than available competition, in any channel.
Accepting the above changes means that helping NAMs to sell better is no longer adequate. In fact, it could be said that in the current climate, NAMs would be better served by being trained to buy, treating them as buyers and optimising the whole supplier-retailer relationship by operating from the perspective of buying rather than selling.
In doing so, it might be useful to distinguish sympathy and empathy within the persuasion process… This means helping the NAM to step into the buyer’s shoes – sympathy – understand the buying perspective, before reverting to the seller’s shoes and completing the sale, empathy…
In working effectively from the perspective of the buyer, it is vital for a NAM to be able to calculate cost and demonstrate value… There is also a need to help drive sales and cut costs in order to enhance a retailer’s net margin. If a NAM can also drive capital rotation by helping a buyer to increase a retailer’s rate of stockturn via smaller, more frequent deliveries matched to offtake, it is possible to improve ROCE.
In other words, the combination of increased net margin and capital rotation drives ROCE, which in turn drives the retailer’s share price, a major ingredient of buyer remuneration.
All else is detail…
