Conditionality without conditions. That was the name of a conference I attended last week, presented by The Gap Partnership with a panel debate and chance to discuss the changing relationship between the big retailers and their suppliers. For anyone reading who hasn’t worked in the world of “big retail” then you will have no idea of the normal tactics employed in the name of “joint business planning”…a polite term used by grocery giants and big manufacturers when talking about the ritual of trying to negotiate the greatest share of the profit whilst using each other to try to drive better sales than your competitor.
Acronyms like JBP, ORD, ROI, YOY* are batted from one side of the table to the other…being traded for shelf space, prominent display in-store, delisting of your enemy’s products, a brand feature on a recipe card “created” by James Martin or Heston. And like it or not some of the suppliers spar well. It isn’t always the retailers who win the game. Often the consumer also fairs well with paper thin supply chain margins and even loss leaders put in place to please the BOGOF seeker.
Last week’s conference suggested that times were changing however. That Brexit, economic pressures, GSCOP* (a code to make sure the grocery stores play nice with suppliers) and a lack of organic growth was forcing a change in retail and that stakeholders were starting to find ways to work together to build consumer focused categories. No longer would there be tight rules and measures but conditions based on trust and a joint goal…and a hope that the other stores and suppliers will play fair and stay true to the spirit of the new retail era. It sounds like a very complex game of “chicken”…with many drivers and many cars. A car crash waiting to happen as one party breaks away in a bid for the chequered flag? I truly hope not. A real commitment to deliver longer term aligned plans could offer the best return for the consumer in pending times of potential inflation and economic uncertainty. However, competitor and shareholder pressure are likely to have too much influence in this game and a change in senior management, a drive to hit bonuses or an impatience to see delivery of a three year plan could easily see great account relationships uprooted and damaged without recourse.
The conference made me think about my relationship with H. At just 4.5 years old, our life has become full of “deals”…promises I ask Hannah to make in exchange for her demands. An extra ten minutes before bed, another biscuit, fizzy pop instead of water. Traded for best behaviour tomorrow, brushing teeth without a fuss, washing hands before dinner. Conditions I impose but without real consequence if they aren’t followed through. I berate her if she tries to renege but as she grows up and gets more confident she pushes it just a little more each time before conforming. Like the retailer / supplier conundrum, Hannah will one day realise my conditionality is fragile…will she want to work together and find a mutually beneficial way forward or will she want to “win”?
“I’ll do you a deal” she says.
“If you let me have five sweets, I will tidy up my toys”
You pay good money to train in the skills she has already developed. Like a graduate of The Gap Partnership she has worked out that I may not concede fully but ill generally trade something. And she is good at negotiating too. She opens extreme, happy to agree at 3 sweets and gleefully telling me “I’d have been happy with two!”. At least the retail buyer waits until you are out the door, laughing as they watch you walk to the car park, calling the boss with the bad news…getting wet in the rain. H beams, clutching her prize and opening her eyes wide so I can really see her delight. Next time I’ll be firmer in my stance…next time.
It will be fascinating to watch how H develops her skills of negotiation and whether my training will be put to shame as she flexes her natural ability to wrap me around her little finger. Maybe one day she will use those skills to take part in the wonderful game of FMCG*…joining one of the big players and working with whatever dynamics will be at play in 2036.
Meanwhile, it will be really interesting to see what happens in “big retail” at this very pivotal time. I am very much in the cheap seats of this world as a tiny supplier but I would like to see “conditionality without conditions” bring benefit to the consumer as well as reasonable, commercially viable returns for all stakeholders. Perhaps this call for a new way of working is the realisation by stakeholders that something needs to change in this current market. And let’s hope we see how the race goes for at least a few “laps of the track” before the next Reset, Renew or other change slogan signals the start of another retail era…with different rules, tactics, promises… and deals for sweets!
*Notes for those baffled by the acronyms in this blog…
JBP – joint business plan, an agreement between retail buyers and suppliers about what they will do for each other and what targets they are both committing to achieve.
ORD – over-rider discount, a sum paid to the retailer if targets are met.
ROI – return on investment, a measure used by manufacturers who want to ensure that any money they invest to service the retailer will deliver them a reasonable return / profit.
YOY- year on year, a term comparing this year with last year e.g. the targeted growth in sales or profit YOY.
GSCoP – groceries supply code of practise, a government imposed set of rules by which major retailers operate with the objective of ensuring fairness in dealings with suppliers.
FMCG – fast moving consumer goods, a term used for products which are purchased frequently by customers at a reasonably low price. This includes many of the core grocery products sold in supermarkets.