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ROUTES TO MARKET

ARE YOU READY FOR THE RETAIL REVOLUTION
In this special focus on retail, we first look at how retailers are changing their attitude to suppliers. In a separate article, Winning at Retail, we look at how this trend towards alliances is playing out in the IT sector and at the tactics suppliers need to adopt if they want to thrive in the new environment.
Author: Max Hotopf | Editor the Routes to Market Journal
Email: max@the-rtma.com

Rating: 2 / 5 | Rate this article

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There is plenty of evidence that retailers are adopting a new approach towards suppliers. Today, big retailers want alliances with favoured suppliers. They are eager to move from confrontational buy/sell tactics, argues Professor Nirmalya Kumar, of the International Institute for Management Development in Lausanne. "You only have to look at the statements from Tesco and Sainsbury in the UK, and from Walmart in the USA to see that is the case," says Kumar.

Kumar argues that the main driver for alliances is the need to squeeze prices out of the retail model. But he says that, so far, retailers in mainland Europe have not made the switch: "Companies like Carrefour show little sign of wanting to change."

"The world's largest retailers have all recognised that around 60pc of their profits come from 20pc of their customers."

But a recent survey by VIA International shows that even retailers who outwardly appear rooted in the traditional confrontational model are willing to change. And VIA consultant Michael White argues that the shift towards the alliance model has much deeper roots than just cutting costs.

White says: "We interviewed 40 executives in major retailers around the world. The vast majority of them are very interested in moving away from confrontational buy/sell relationships towards closer alliances, where they cooperate with suppliers. The more senior the manager, the more open they are to this concept."

Rob Abshire, who heads up US retail consultancy Clarion Marketing and Communications, which specialises in helping suppliers sell into retail, agrees: "The world's largest retailers have all recognised that around 60pc of their profits come from 20pc of their customers. And they are beginning to deploy IT systems which enable them to work out who makes up that top slice - and who is in the next 20pc."

Abshire and White argue that retail is changing faster than you might think. Suppliers who don't see, and understand, the changes may soon find themselves without consumer access.

VIA developed a four step model (see diagram) to illustrate the different ways retailers can work with suppliers. This shows retailers working with suppliers to build demand and to deliver what White terms 'an enhanced customer experience.' White says: "It was interesting to note that retailers immediately identified strongly with the model we were showing them. They also had a tendency to claim that they were engaged in rather more advanced practices than they perhaps were! What was significant to me was the enthusiasm they felt for the model - they definitely see it as the future."


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