In insecure times it is even more important as a supplier to create value for both your own company and retailers.
Right now, the annual negotiations between suppliers and retailers are ongoing. However, this year is different due to high inflation, increasing prices of raw materials, and general supply issues.
The insecure times require much more from both the retailer and the suppliers. The retailers require that the price discussion will be backed with facts about the real raw material increases and they need any suggestions from their suppliers to be backed with insights and data.
We are already seeing the consumer's behaviour change, as the share of promoted products in the average basket is increasing, and the fight between the retailers is only about price. In the end what really matters for the retailers is that they have the right products on the shelves and that they work with suppliers, who can secure on-time delivery.
How can you as a supplier cope with these changes?
Insights and data
The first thing we recommend is that you start to plan and execute based on all the available insights you have in your company. Use the retailer's own data (POS data) when going for the annual negotiations, and give recommendations based on data and insights and not gut feelings.
Prices and promotions
It is more important than ever for retailers to have the right promotions at the right price. The big question for the supplier is, what is a good promotion, and what is the right price?
Retailers use promotions to drive traffic, increase conversion, and increase the average basket size. The promotion paper is mostly used to drive traffic to the stores or online shops, hence the retailers are looking for the most profitable promotions which drive the biggest turnover, hence the price is important, but also the picture in the actual promotion paper and the placement in the promotion paper.
When analyzing your trade promotions as a supplier, you must look at topline growth, and the uplift from the baseline for the retailer, and at the same time look at your own return of investment (ROI)
Forecasting – supply chain
On-shelf availability (OSA) or Out Of Stock (OOS) are two of the most important terms to know when working with retailers.
The retailers will measure your serviceability each week and month, and they only want to work with suppliers, who can promise an On Time In Full (OTIF) delivery every time. As we see sales being driven by promotions, it is even more important that your forecasting accuracy as a supplier is high. It does not matter for the retailer to have the right promotion and the right time but without any products.
To sum it up: We recommend that you use the available data to increase your forecasting accuracy, analyze your trade promotion, and optimize your assortment and prices.
In effectmanager, we can help you become excellent in promotion and assortment management.
Remember, if you have your data, tools, processes, competencies, and organizations in place, you can do your annual negotiations 365 days a year and have a continuing dialogue with the retailers.
If you what to know more, please do not hesitate to contact me.
Jesper Drachmann
