Articles

The Prickly Path of Supplier Partnerships

The Heritage Dictionary describes partnership as: “A relationship between individuals or groups that is characterized by mutual cooperation and responsibility, as for the achievement of a specified goal.”

Herein lies the greatest issue in managing partnerships between retailers and suppliers – the comprehension of the goal and the true context in which that goal can be realised and sustained. The relationship begins with radically differing agendas, differing core competencies, differing drivers and differing responsibilities both within the relationship and to extended stakeholders.

Suppliers want to maximise distribution while retailers want exclusivity or restricted distribution. Suppliers create and build products and brands while retailers exploit them. Suppliers see product lifecycles as strategic while retailers view product listings and sales tactically. Suppliers influence customers in their homes while retailers influence customers in the store at the time they are buying.

For relationships between merchants and product suppliers to be truly productive, the word “partnership” needs to be more about the walk and less about the talk. It demands a less adversarial and more collaborative approach where the goals and roles of each party are more honestly articulated, agreed, supported and delivered.

The productive return for each party from their respective assets has an optimal level in the medium to long term. Finding the optimum level acceptable to both sides is the first step. The second is mutual respect for the role each party must play in order to achieve and maintain productive return into the future. Products and brands can play four key roles for retailers. They can 1) provide a customer service; 2) create volume throughput & foot traffic; 3) reinforce differentiation (value / low price / aspiration / innovation); and 4) they can generate strong gross profit contribution. Profit is not always the key role.

Great retail partners know these four roles and how to play to them collaboratively – as a team. They create the space for each other to be able to invest and be rewarded equally for their respective roles in creating and exploiting opportunity that the customer supports.

One of the great subtleties in modern retail management is to understand that customers love stimulation (new news) but they don’t like change. Customers seek continual reinforcement of relevance within the context of right now, but prefer set and forget habit. This is true of both what they buy and where they buy it. “Evidential noise” (a wall of perceived proof) is what challenges or reinforces their choices on an ongoing basis.

To continue to meet shared goals, retail partners must create reasons to buy in the customer’s mind that are activated at point of purchase. Each partner has a stake in the outcome. Each partner has a part they need to play. And at the end of the day, the critical contract is actually the one they share with the customer.

If the path you are currently on is prickly, chances are it isn’t really a partnership at all.