The recent collapses of chains like Borders, added to the 23 casualties last year and over 20+ liquidations anticipated in the New Year, have obviously resulted in increased trade concentration and the risk of higher levels of dependency on the major multiples. Moreover, apart from their tendency to cherry-pick within categories, the multiples rarely offer full representation of the suppliers’ range at point of sale and provide minimum service at point of sale.
Add to this the fact that in a zero-sum game the additional trade support required by the major multiples means that there are even less supplier resources available for maintenance and development of the independent trade.
This, coupled with the fact that the revenue stream from a good independent retailer cannot cover the costs of regular calling by a salesforce, means that the independent trade will continue to grow weaker, unless suppliers take a radically different approach to investment in the channel.
Historically, suppliers have regarded the independent trade as a sales function, needing to at least break even on the cost of visit vs. size of order in order required to justify the cost of calling. This approach has obviously limited the number of direct-call accounts that are economically viable, resulting in the above increases in trade concentration.
In many categories such as toys, books, houseware and home entertainment, the independent specialist retailer can fulfill an important ‘educational’ role on behalf of the supplier. Here the retailer helps to bring the consumers closer to the brand, allowing them to interact and bond with the product. They will also benefit from advice and shop staff expertise.
Properly supported with appropriate training and sales-promotional material, the independent retail outlet can also function as a ‘living billboard’ for the brand, communicating with the consumer in a way not easily achieved via the multiples. Unfortunately, given the economics of running an independent retail store, it is not easy for the retailer to match competitor’s prices. This inevitably results in their shoppers taking the advice and experience of the brand, and buying the product elsewhere. The increasing appeal of online retailing simply adds to the dilemma of ‘lost sales opportunities’ for a specialist retailer.
However, if the supplier shifts the role of the independent retailer from a Sales to a Marketing function, seeing the outlet as an interactive advertising medium, then it becomes easier for the supplier to classify at least some of the cost of independent calling as ‘advertising’. In fact, given the increasing fragmentation of traditional above-the-line media, it could be said that a well-motivated and supported specialist retailer could have more brand impact on the consumer than traditional media.
With this change in stance, it becomes easier to justify the allocation of say 50% of the cost of independent coverage to the brand’s advertising budget. With this increased level of investment in a neglected channel, it becomes easier for pro-active suppliers to insist upon full compliance at point-of-sale in exchange for the help and advice they provide to the independent retailer.
If the specialist retailer is thus given the role of brand ambassador, and benefits from regular focused help, it becomes essential that the independent salesman be trained to be a mini-CEO of the territory, in the way that a NAM or KAM is regarded as a CEO of the major Account, and incidentally a Brand manager is regarded as a CEO of the brand. In fact they all become business managers of business units, with responsibility for sales and profitability.
The salesforce will need skills in identifying a retailer’s potential in fulfilling the brand ambassador role, and have sufficient retail business consultancy and management skills to help the customer to improve outlet productivity. They should also be able to train shop staff in optimising every contact with the shopper, on behalf of the brand. In addition, this training of shop staff should include skill development in selling, in order to ensure that sales lost to other retailers are kept to a minimum. For the supplier there can be an additional gain via using the independent sales trained in this way as a pool of in-house talent that can migrate to the NAM and KAM role
Longer term, this focused drive to improve the impact of the specialist independent retailer will not only dilute some of the multiples’ influence in the market, but in the long term will also help to ensure maximum choice and value for the consumer. The ultimate benefit however, will be in building and maintaining brand equity via the ‘living billboard’.
Allowing the market to evolve ‘naturally’, could possibly result in the opposite….
