Although the growth in customer concentration at the top end of most trade sectors, especially UK grocery, has been halted by the advance of the discounters, and global is becoming increasingly local, combined with our increasing ability to communicate directly with the consumer via social media, it could be said that major customers are ‘more manageable’ and thereby less threatening…
In addition, the relative difficulty in influencing online shopping behaviour combined with the high cost of servicing small accounts, could cause us to forget the potential advantages of cultivating and developing business with small customers, especially as a means of keeping our mults ‘under control’ and moving towards fair share dealings.
For instance, as we enter a post Article 50 Brexit environment, the UKs ‘re-appreciation’ of independent retail presents potential lessons in channel re-alignment for local and global consumption.
Four major elements are changing UK channel configuration, firstly causing a significant power-shift within convenience, as the two radically different cultures of Tesco and the Co-op continue to develop the top end of the arena and Sainsbury's increasing rely on convenience for growth…
Moreover, discount drug is in a state of flux, courtesy of Hutchison Whampoa, who incidentally also have ambitions in the distribution of mobile telephony, and as a result, are re-defining their business model in retail…
To this must be added the near certainty that the government will further de-regulate retail pharmacy (self-medication) as a way of easing pressure on the national purse, allowing grocery retail and discount drug to compete aggressively with traditional pharmacy, the only real constraint being the availability of qualified pharmacists…
Given the basics of supply and demand, it seems obvious that those with deeper pockets with which to fund a 'golden hello' are unlikely to suffer from such shortages…
And all this at a time when Walgreens Boots Alliance continue to roll out their global strategy, everywhere….
Whilst ‘risk-seekers’ are prepared to tolerate/encourage ‘extreme’ trade concentration, many suppliers may prefer to spread risk by building and maintaining effective distribution at the lower end of the trade.
As the future is probably more about store-level retail competition, then suppliers should prioritise ‘Intrapreneurial’ store managers within the multiples’ superstore base. However, whilst such managers are/can be highly qualified, and motivated by share options and career aspirations, nothing beats the dedication and focus of an entrepreneurial owner-manager that has managed to survive global recession and flat-line demand, attempting to optimise the performance of a small outlet, living with the constant distraction of overdraft constraints and other life-or-death issues associated with small business survival.
However, whilst small independents undoubtedly need professional help, they are often unwilling/unable to pay market rates. Even if suppliers are willing to supply a version of this help via consultative-selling at outlet level, it is unlikely that full compliance will yield sufficient return on investment in terms of sell-through.
The answer has to be to seek to work with ‘natural-groupings’ via wholesalers, symbol groups and dedicated third-party organisations designed to manage the entire marketing-sales-merchandising role at independent level.
Successful partnership with such intermediaries requires NAM/KAM-level analysis of the partners’ organisational needs, taking a realistic view of the degree of trade-off in having to share their resources with other suppliers, coupled with their need to achieve acceptable levels of return on investment at outlet level.
Providing tailor-made solutions, fully integrated with the intermediary’s own marketing aspirations, targeted at optimising performance at outlet level, can help ensure the achievement of ‘fair share’ vis a vis other suppliers in their portfolio.
This treatment of the intermediary as a ‘national account’ and managing them appropriately can help in optimising resource allocation across the supplier’s customer portfolio.
Whilst dedicated intermediaries can be of considerable help in managing existing independent sectors cost-effectively, suppliers should also be sensitive to opportunities to cultivate new customers in emerging channels, i.e. there are 17,000 postmasters in the UK capable of granting potential access to 28 million consumers/shoppers each week….
Finally, for those small retailers outside the ‘loop’, who wish to remain independent because they ‘like it that way’, and are by definition highly individual, one can thankfully rely upon the rule of large numbers in finding groups with needs that are sufficiently similar and have sufficient critical mass to make tailor-making a viable option. The solution can then be to design template-variants aimed at meeting the needs of these ‘obvious’ segments. All that remains is to find appropriate media with which to communicate those solutions…
This concrete recognition and development of independent retail options will not only help to balance channel-mix but will also enable the supplier to manage the mults, and thus help to preserve brand integrity…
Alternatively, suppliers have the option of ignoring the little guys and spending the extra cash on fire-proof clothing for the 2017-18 kitchen…?
