The martyrs in the retail world may think they’re alone as they move to counter the forces perpetually squeezing their profit margins—credit card fees, consumer spending slow-downs, a credit crunch and increased operating costs—but there’s an often-overlooked ally at their disposal: suppliers.
“The supplier representative knows a lot of the retailer’s history and a lot about what products sell well at that store,” said Ron Coppel, vice president of business development at c-store supplier Eby-Brown. “We definitely deliver the tools for doing some ‘what-if’ scenarios to gauge the success of promotions.”
It’s this notion of “value creation” beyond the supply chain’s simplicities—the products and pricing—that can ensure the retailer-supplier relationship offers maximum value for both parties, said Jim Hertel, managing partner at retail marketing firm Willard Bishop.
But here’s the rub: c-store operators don’t always lean on suppliers for programs or tools that can measure value in the relevant aspects of their relationship.
Often, retailers simply look to suppliers for programs or promotions that can be introduced periodically throughout the year. It’s what is done within that year, the incremental measurements and occasional data analysis, that truly defines the effectiveness of the relationship.
The spectrum of practices on this front “ranges from ultraviolet to infrared,” Hertel said. “The visibility is all over the place. It’s tough to get visibility and the data, and then understand exactly what the vendor programs are.”
To be sure, understanding a program is one thing; measuring what it achieves is an entirely different matter.
“There’s probably a lot of vendor funding that doesn’t achieve what the supplier is looking for,” Hertel said. “It really starts from a retailer and supplier’s set of discussions.”
Developing a common set of goals at varying levels—for the category, the vendor, the supplier, retailer and such—is an effective starting point. It can be a relatively short list defining what each player’s role is and what the expectations will be for measurements like unit growth or profit margins.
ACE Convenience Stores, a chain based in Waco, Texas, typically relies on its supplier, C.D. Hartnett Co., to recommend new products and promotions that are working well at other small chains in its market.
Jacquelyn Rochelle, operating manager and merchandiser for ACE stores, said she and C.D. Hartnett reps meet every two months to explore new ideas and promotions for ACE’s stores.
“They do a lot for us,” Rochelle said. “It works well.” It’s an effective relationship, though she added that she’d like to eventually have more analytics tools at her disposal, something to measure the effectiveness of both new and existing programs.
Indeed, suppliers may be seeing growth possibilities within these independent-level c-store chains, maybe not brands as small as ACE Convenience Stores, but certainly the 20- to 30-store chains that make up enough “white space” in a market to provide additional value to a supplier.
“There are opportunities there as well,” Hertel said. “I think the message that doesn’t necessarily get through to suppliers is there’s much that can be done at the independent level. A lot of growth is available if the suppliers just invest the time and attention at that level.”
Eby-Brown provides monthly sales bulletins that let retailers shop for deals or promotions that work well for their respective stores, but it’s the company’s representatives who ultimately provide the value to each store. Ready-made, turnkey operations like Eby-Brown’s Pronto Café, for the coffee category, offer retailers the seasonal adjustments they need.
“We also have annual trade shows and vendor days,” Coppel said, “both of which allow one-on-one, face-to-face meetings between our customers and key vendors—the people who the category manager wants to see.”
In many cases, Coppel said, retailers lay out promotional calendars for the entire year, but they still work with suppliers to make adjustments for last-minute opportunities or new programs.
Eby-Brown’s retailers can track promotions with year-to-year or “what-if” scenarios that compare sales, pricing, margins or other aspects. “We help them with programming and space management,” Coppel said. “Careful management can definitely improve margins.”
Similarly, McLane Co., the industry’s largest wholesaler, holds annual trade shows that attracts hundreds of manufacturers showcasing new and popular items that help retailers plan their stores.
Oklahoma City-based c-store chain Love’s Travel Stops & Country Stores relies on much of its own analysis to formulate in-store programs for its 140 units, but district managers said they often look to their supplier to help steer product development, particularly as it applies to merchandising cigarettes.
Cigarettes are a category Eby-Brown pours vast resources into, namely through its ORCHID (optimized replenishment of cigarettes using historical and inventory data) program to track historical sales and inventory data so retailers can optimize orders and replenish out-of-stocks.
“With cigarettes, if the inventory isn’t closely monitored it could easily be mismanaged,” Coppel said. “Then you have significant dollars on the shelf that aren’t selling, or you’re out of stock on top-selling items.”
Frequent review and upgrades to key categories and existing brands can be essential parts of suppliers’ support services.
“Existing items are obviously the lifeblood of any retailer and supplier,” Hertel said. “On the existing brands, they want to track unit trends, dollar trends, in-store inventory levels,” both at the brand level and the category level when possible.
For new items, however, the most critical measurement of success comes in monitoring the supplier and retailer’s speed to shelf. “How does it compare to competitors?” Hertel said.
While annual reviews are common, semi-annual or quarterly planning on all of these fronts can be far better to gauge success, Hertel said. “If people could commit, it would benefit them both.” CSD