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Managing Retailer Relationships in a Deflationary Environment

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Managing Retailer Relationships in a Deflationary Environment: The Retailers Perspective

Last year we conducted a confidential interviewing programme at director level with major UK suppliers to evaluate supplier strategies in a deflationary price selling environment. Our new 2005 research benchmarks these findings against retailer policy through an interviewing programme at director level with major UK retailers.

Our 2004 report concluded that while retailers are tough and not always very fair, they can successfully be managed by effective and efficient suppliers. This new report looks at the relationship from the retailers’ perspective.

Price continues to be a key message for all the Big Four retailers and there has undoubtedly been significant deflationary pressure on the prices paid to suppliers as the major retail players, particularly Asda and Tesco, vie for market share by offering “value” through both EDLP and promotions. Our report compares the strategy of each the Big Four retailers as they manage and compete within this environment and assesses the implications of these strategies for supplier relationships.

We consider in detail a number of key strategic issues for retailers and the role played by suppliers in addressing these. Do retailers want anything beyond the lowest price in their buying negotiations? Where and what is the role of innovation? What are the implications of own label developments for retailer relationships with both own label and branded suppliers? What are retailers looking for in their ongoing expansion into convenience retailing? Is category management really the greatest area of supplier retailer collaboration? How can promotions be improved? What is the relevance of media services? And where in the supply chain are retailers looking for most supplier collaboration?

The report suggests two major changes which may occur in retailer policy, both of which will have important implications for suppliers. The present price war with Tesco makes no long term sense for the owners of Asda, and the future may see an increasing desire to enhance Asda margins rather than fight for incremental market share. And in Tesco, there appears to be an increasing tendency to downplay the importance of category management. Our report explores the reasons for these trends.The report compares and contrasts the relationship strategies of each of the Big Four. We identify the key priorities for retailers in their relationships with suppliers and predict where the greatest opportunities and threats are likely to be for both own label and branded suppliers.

The research is based upon a confidential interviewing programme at Director level in the major retailers. Their views on the future of the industry have been cross referenced with those of leading suppliers and City Analysts.

Published: June 2005

Price: £ 795, US$ 1400, € 1200

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