Setting your product up for retail success
Approximately 70% of food in Canada is sold at retail. Many food and beverage processors need to sell into retail to ensure they have the volume to generate economies of scale that keep them competitive. While Canadian food retail remains dominated by a relatively small number of large chains, fragmentation is happening. There has been more food purchased in specialized retailers, drug stores, farmer’s markets, non-traditional channels like Dollar stores, mass merchants and direct online than ever before.
The best chance for success happens when products are on the right shelf in the right store.
The best chance for success happens when products are on the right shelf in the right store. There are choices, and those who supply retail should consider the options and focus their efforts where the products have the best opportunity to sell.
Every retailer’s approach to the market is unique and you should understand the focus and priorities within their business. Retailer’s websites often include information about their business priorities and overall direction. Prepare several questions when you are meeting with your customers. They appreciate your interest and engagement.
Starting the question with a statement illustrates that you’re looking at their business and gives them the option to comment. Some examples of these questions could be:
We plan for a 5% year over year increase. Is this in line with your expectations?
I’ve noticed some initiatives at the store level to reduce shrink. Will this be a key priority this year?
I’ve noticed your flyer has increased the item count. Will you be investing more to drive sales this year?
There’s more merchandising space in your stores devoted to private label. Will we see more of this to increase penetration?
The most prosperous relationships develop when processors and retailers have a common understanding of expectations. This should include attributes such as sales, service level, product specs and standards, food safety certifications, other third-party audits and participation in promotional programs. Many of these are not negotiable such as food safety expectations, specs and standards and third-party audits. When both parties understand the terms of the relationship, it’s much easier to determine if the products are performing. Usually, sales targets are the most important metrics to meet or exceed.
Sales are often the top priority for retailers, and they appreciate suppliers who are committed to grow volume together. Every item should have a sales target, which can be an absolute number, such as cases per store per week or a percentage increase over the previous year. Sales are quantifiable, and the processor and the retailer should have a common expectation for results.
Establish your key decision-maker within the retailer’s organization. Usually, that’s a category manager, but in smaller retailers, they can have different titles. This is the person you negotiate with. It’s beneficial to develop relationships with others in the organization but always remember to keep the key decision-maker informed and only negotiate with them unless they give someone else the authority to decide.
Communication with retailers is not just something that happens organically. Time is valuable, and they usually have thousands of items to manage. Plan your interaction and think of it as a marathon where you must pace yourself. One to two meetings per year is reasonable to discuss results and plan for the future. Celebrate the success you have together, but understand they need to continue delivering sales and margin to keep their stores operating.
One of the biggest challenges is to accept the margins retailers need to make on their products for the retailer to remain in business. There are significant costs to operating stores, distribution networks, promotion programs and all other components of their business. These costs are paid by the margin they generate. If they own the store, retailers will control setting the retail price to ensure they generate the margin required.
Category managers do not set the margins, and they cannot change them. These margins are targets they must achieve. They will find more opportunities for products that enable them to deliver the category margin with a retail price that makes the product enticing to consumers.
The retail environment is competitive. Retailers need to deliver sales and margins to stay in business. Relationships prosper when suppliers understand their customers, the retailers. You can sell the same product in different stores, but how you sell it should vary by customer. Every retailer is unique, and the programs you create to sell your products should reflect their approach and position in the market.
Article by: Peter Chapman