A New Approach to Retailer/Supplier Collaboration: How Data Sharing Can Transform Profit Margins

April 4, 2016
ted-moyer's picture
By Ted Moyer
Solutions Consultant, Market6

For grocery retailers, growth has traditionally been slow and hard to come by; in terms of products offered, store formats, shopping experiences, etc., not much has evolved in the space over the past 50 years. The last major inflection point of change was the introduction of big box stores like Wal-Mart and Target (News - Alert), which put even more pressure on traditional retailers to innovate in order to grow their businesses. Margins have become so slim in the grocery retail industry that 1 percent growth is considered exceptional, and as a result, retailers are always looking for a competitive advantage to stay ahead. 

For CPG brands to grow, it’s all about understanding what moves the needle for a specific retailer’s business and adjusting accordingly.  The opportunity exists for CPGs to grow their business between 15-20 percent and beat out the competition on a retailer-by-retailer basis. Partnerships with retailers fuels this growth. 

Given the challenges (and opportunities) that both retailers and suppliers are facing at present, both parties must find more effective ways of sharing data and collaborating to make the most of every dollar. However, this is easier said than done.  

Traditionally, the relationship between CPGs and retailers has been adversarial in nature. Retailers have concerns over sharing data since it could expose them to competitive threats if the data isn’t protected and managed in the right way.However, there is a competitive edge to be had for retailers who embrace data sharing, now more than ever. 

Unified View of the Business 

As consumers are looking for more product diversity, the growth of small brands has created a tremendous amount of data complexity. This complexity only multiplies as different business units use multiple systems for data collection, monitoring and analysis. Today, merchandising has its own system, supply has its own system, and so on. Retailers need a single, unified view of the business that all members of the supply chain are going to look at in order to measure success, something that is only possible when suppliers and retailers can collaboratively share data. 

To accomplish this, retailers need to reframe the traditional view they’ve taken of their supplier partners, and leverage the supplier community to do analysis on their behalf. Of course, this necessitates sharing data, but category managers inside of grocery stores are so busy that they don’t have time to do the analysis themselves. When suppliers can approach retailers with out of stock problems and causes, efficiency and ROI increases across the board.

Store level access to insight

In order to generate effective business planning and collaboration, store managers need access to data and analytics across store categories at a granular level by product, store and day. This type of highly specific analysis—at the store level—at least 28 days out, gives managers the insights they need to make stocking, and restocking, decisions. When viewed in conjunction with the above idea of achieving a unified view of the business, this alleviates potential discrepancies or misaligned information that emerges from different business units or supply partners. 

Joint business and category planning 

Category managers or merchandisers have hundreds of suppliers calling on them at any given time, each of which is looking at different data sets. By turning the tables and requiring all suppliers to look at categories in the same way as the retailer, grocers can realize significant time and resource savings. In order to create growth plans that are repeatable across every single category in the business, retailers have to go the route of data sharing. 

In the past, relations between suppliers and retailers may have grown contentious over as little as ten cents over a case of soda, and the cumulative effect of these little decisions are what managed the grocery retailer’s business. Instead of making decisions on a unit price basis, retailers need to be looking at the total business. A change in management style is needed. The ability to share data and use analytics to improve joint decisions has the power to transform profit margins on both sides. In today’s competitive markets, this new approach can make all the difference. 

This post originally appeared at infoTECH Spotlight.

Category:  Category Management, Retailer-Supplier Collaboration