Tuesday 14 April 2009

Credit insurance and the role of independent retailers

Whilst the withdrawal of trade credit insurance cover for independent retailers has several implications in terms of increased customer concentration, changes in supplier-customer power-balance and supplier risk, the real issue for suppliers has to be the fundamental role of the independent retailer within their overall marketing and trade marketing strategies.
Essentially, in many categories such as electronics, toys, books and wines, the independent specialist provides a means for the consumer to get to know the product, 'press the buttons' and seek in-use advice, in ways not available elsewhere. The specialist (enthusiast/champion, how few of these are available?) often provides this service in the full knowledge that the 'shopper' will later source the product at a lower price elsewhere, often online.
Suppliers can feel that, as their brands benefit from the sale anyway, then little harm is done by the gradual shut-down of the independent specialist channel. This obviously ignores the fact that without the 'education' provided by a well-supported specialist, the consumer is more liable to choose an alternative brand.
Whilst the supplier may want to treat all retailers equally in proportion to their volume, and cannot afford to support inefficiency, there may be a case for acknowledgeing the 'educational' role of the specialist by developing a special support budget to cover additional attention by the specialist salesforce (business education of the retailer in terms of product knowledge, display, and especially retail-finance) The negative impact on the customer P&L could be neutralised by factoring in the eventual consumer purchase via other channels (i.e. calculate a % of multiples/online sales, net it off their P&L and add to the Specialist P&L) Incidentally, the additional risk of uninsured credit could be reflected as an additional cost on the customer P&L, in the short term, in the hope that continuous provision of advice on business finance will cause both parties to reduce financial exposure via shorter credit periods, for those specialists that can take the advice and remain standing….

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