As the dust settles on a tumultuous two year stretch in retail we can’t help but notice a rather large elephant in the room - we are at a low point in brand-retailer relationships.
After dozens of high stakes negotiations, supply constraints and cost increases, we’ve drawn down much of the positive equity in many relationships. Naturally, when trust has eroded it’s hard to talk about the good stuff and plan for the future. We’ve observed the loss of conversations about growth or upside. Viewpoints have become clouded and less rational; risk aversion has heightened. Emotions have taken over more than is healthy.
As we turn the page in 2023, we need to pull out of this negative tailspin.
We believe there is a path forward that benefits both sides of the retail ecosystem and puts all on a path to sustainable growth, but first, it's time to rebuild some trust & credibility.
Tell the truth about cost increases. Everyone can see it anyway.
Covid dropped a boulder on the balanced scales of supply and demand, causing costs for brands to rise precipitously. This effect was real and traceable. However, brands approached this reality bluntly at best and opportunistically at worst, and in many cases overreached. We saw cost change conversations turn into Friday email drops (demands) “effective immediately”; contracts and norms were ignored. The was zero conversation about how to make this work. Naturally, this caused retail merchants to react in a negative fashion, even if the data might support the increase. The rise of CPG profitability throughout 2021 only contributed to distrust and disdain for brand cost moves. Everyone can see these shifts in the numbers. The data is public, and to pretend nothing happened only further frustrates retailers.
Don’t inject combat into collaborative forums
In response, we saw many retailers inject combative behavior in ostensibly collaborative forums. In Joint Business Planning, for example, where brands were used to conversations centered on strategy and interests, they’d find themselves ambushed by extreme demands lobbed via email. No back and forth. No ability to discuss mutual strategies. No collaboration on growth-driving plays. This has left brands frustrated and angry.
Don’t poison collaborative opportunities by letting frustration and emotion take over. There is a time and a place for tough, honest conversation, but it should be just that. A conversation.
We know both side of the retail ecosystem are better than this.
As we talk about how to move forward with brands and retailers, we understand both sides of the equation are emotional and frustrated. It’s natural to look for a little payback. A whole fleet of consulting firms are making hay on these emotional responses, but we’ve only seen them exacerbate already strained relationships – the only winners are the big consultanFor both brands and retailers, it is time to take a more thoughtful, measured, strategic approach to rebuilding trust & credibility, and ultimately unlocking growth and value.
Build a culture of strategic and thoughtful negotiation through better training, coaching and preparing leaders to carry the torch and hold teams accountable.
Be more thoughtful in tiering your counterparts, using different negotiation and partnership tools depending on their importance as a partner - or the financial opportunity.
Develop a variety of frameworks and tools that produce the most value depending on the nature of the relationship.
Spend more time with important counterparts sharing strategies and building forums to brainstorm future opportunity.
Overhaul the JBP process to return it to its original intention: A way for a limited number of strategically and financially aligned partners to drive outsized opportunity and results
Combine brick & mortar and digital negotiations into a single discussion that allows both parties to find greater opportunity and tradeoffs.
To remain future oriented is a huge challenge when we’re still licking open wounds, but that’s exactly why it presents a unique opportunity for organizations mature enough to see the truth. At this inflection point in retailer - brand relationships, winners will focus less on the past years and more on what makes them successful moving forward.
Naturally, every organization will require something different. Please reach out with your thoughts, comments and advice. More discussion produces better insights and results.
Daniel Duty
Will Davis