Buying: the first step to the bottom line

Store Equipment & Design, Nov, 2000 by David Litwak

Over the next few years retailers will radically change the way they purchase equipment and supplies.

Remember the good old days of selling to a supermarket? Salesmen would wait in crowded reception areas, then pitch their wares in a cramped buyers cubicles. Fifteen minutes at for retail products, maybe 20 to 25 minutes if you were selling piece of equipment. Do your sales pitch, drop the price and get out. You'd hope the deal would eventually go your way--that is, if the store buyer could remember your pitch from the other 100 he heard that week!

This decades-old supermarket buying paradigm is rapidly changing in many buying offices across the country. And if the truth be known, very few sellers or buyers. are going to feel overly nostalgic about the glory days of the face-to-face, limited-time presentations. Especially in the area of equipment, retailers are seeking a new relationship with suppliers. As part of this new relationship, retailers are looking for suppliers to deliver two types of service: They want their supplier relationships to be on more of a consultancy basis, and they want the ordering process simplified.

Equipment, suppliers, especially case manufacturers and refrigeration companies, as well as front-end and kitchen equipment companies, are lending their expertise to retailers in the planning stages of store layout. While cash or price incentives used to be the way of sealing a deal, today information and expertise are the currency that's becoming more attractive to retailers. Operators are learning that working with suppliers to design systems and stores that are more efficient, effective and pleasing to consumers will add more money to the bottom line over the long run than a few hundred dollars off the price of a particular case.

"More and more we call on our suppliers and potential suppliers to aid us in laying out stores or departments, and to help us specify the exact equipment we need. They'll work with our in-house teams or outside consultants," said one retail vice president of procurement, responding to SE&D's Buying Survey. "We're now more likely to deal with flexible equipment manufacturers who are interested in our business rather than suppliers who deal on price and are only interested in their own business."

BRING ON E-COMMERCE

Simplifying the buying process is a top priority for retailers. Equipment buyers are purchasing a greater range of products today than they did just two years ago. Fifty-four percent indicated their responsibilities have grown, while 76 percent said they are buying a broader range of equipment. Automating the buying process has become one way these buyers are able to handle the extra burden; 92 percent said their companies have automated as much of the purchasing process as possible.

The Internet will play an increased role in equipment purchasing over the next few years. Today more than half the buyers responding to the survey use the Net to at least gain product information, if not directly make purchases over the Web. This will increase substantially in the near future as supplier Web sites become more sophisticated.

Aside from retailers using it to gain information and perhaps order from individual Web sites, the Internet will play a bigger role in equipment purchasing because of the rise of Internet Exchanges. These membership exchanges bring buyers and sellers together. The two largest exchanges, the WorldWide Retail Exchange and the GlobalNetXchange, already have many of the world's largest retailers among their memberships. Euromonitor predicts B2B exchanges will become the most attractive application of e-commerce techniques to "old-economy" companies.

Worldwide B2B e-commerce markets are expected to grow to $7.29 billion by 2004, according to the research firm the Gartner Group. Gartner also predicts that nearly three-quarters of the distributors that use online exchanges will conduct 80 percent of their sales volume on them by the end of next year. A recent Forrester Research poll found that two-thirds of online buyers and sellers plan to use e-marketplaces within two years.

"It can be fatal to your business if you don't join one of these initiatives," Kroger's CIO, Michael Heschel, told a recent GMA executive conference. While most of the products being traded on these Internet exchanges are consumer products, a growing number of equipment and store supply products will also begin to be bought and sold through these marketplaces. This is especially true of store supplies and those pieces of equipment that do not need to be customized.