Retailers gaining power in vendor partnering; but mistrust must be overcome

Drug Store News, Dec 9, 1991 by Winston Weber

Retailers gaining power in vendor partnering But mistrust must be overcome

Today, despite what we read or hear about collaborative relationships, there is still an enormous amount of mistrust in the relationship between retailers and vendors.

Generally speaking, many retailers don't trust most of their vendors. This lack of trust is due to varying business practices and inconsistencies between vendors, between vendor divisions, between vendor field sales managers and senior managers and between brokers and their vendor principals. Retailers get a variety of mixed signals. As a result, they don't always know if they are being given all of the facts, or if the programs being presented to them are as lucrative as those being presented to their competitors. The credibility gap is very broad.

The issue of mistrust, from a retailer's viewpoint, is heightened by a belief that vendors are making an inequitable share of the profits.

Mistrust is not a one-sided issue. Vendors say that retailer intentions are self serving, that they are more interested in building their store images, subsidizing their marketing strategies and lowering their operating costs than they are in establishing collaborative relationships with vendors. They feel they are being taken advantage of, with retailers trying to get into their pockets for every advertising, promotional and profit dollar they can get their hands on.

There is also an underlying concern, expressed by many vendors, that if trade promotion spending continues to increase at the expense of direct-to-consumer advertising, brand loyalty will continue to decline.

During the past several months, we have observed retailer and vendor behavior in over 100 meetings between retailer buyers and vendor account managers. We saw, first hand, why there is so much mistrust at the buyer's desk. The following is just one example of what we saw.

Actual Situation

Buyer: "I have an excess inventory problem on Product X. Sell-through on the last promotion was not as good as expected. What can you do to help me?

Account Manager: "How much do you want?"

Buyer: "I don't know, what can you do for me?"

Account Manager: "How much do you want?"

Buyer: "I can force distribute product to all stores for endcap displays. The cost will be $6,000."

Account Manager: "O.K. You have $6,000."

Buyer: "What can we do to accelerate sell-through off of the displays?"

Account Manager: "How much do you want?"

To make a long story short, the account manager offered another $10,000 for a feature ad. And, what was most unbelievable, by the end of this 30 minute meeting, another $30,000 in promotional dollars were offered to the buyer.

From the buyer's point of view, almost $50,000 in "over and above" funds would not have been offered unless asked for. The vendor account manager, on the other hand, had been "held up" by an important retailer.

This real-life incident is just one small example of how the behavior of both retailers and vendors has resulted in a very high level of mistrust in the industry - . . .possibly higher than ever before.

PHOTO : Win Weber is president of Winston Weber and Associates, Inc., Memphis, Tenn., a management consulting firm which provides sales, marketing and strategic planning consulting to consumer products manufacturers, and consults with both manufacturers and retailers on establishing retailer-supplier partnerships.

The firm also works with retailers in designing and implementing category management. Win Weber has a reputation as a leading consultant in the field of retailer-supplier partnerships.