These are difficult days for the supplier community.

buyer-seller relationship, retailer-supplier relationship, David Pinto, trade relations, suppliers, drug chains, mass retailers, merchandise mix, mass retailing, Walmart, Energizer, Lou Martire, Hallmark, Vince Burke, Unilever, Jerry Brown, Time Warner Retail, Joe Bivona, Hershey, Tom Joyce, Nestle Purina, Paul Cooke, Kellogg's, Dave Jones, Pharmavite, Skip Aldridge, L’Oreal, Karen Fondu, Alva/Amco, Jeff Gerchenson, Gallo, Herb Smith, Johnson & Johnson, Frank Maione, Profoot, John Vayianos

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Inside This Issue - Opinion

Relationships more important than ever for suppliers, retailers

September 13th, 2010
by David Pinto

These are difficult days for the supplier community.

Where drug chains and other mass retailers once approached suppliers as partners, they now largely see them only as adversaries, obstacles to be overcome or threatened into submission. Where once bargaining was an integral part of the buyer-seller relationship, retailers now routinely dictate terms ­— leaving suppliers with little choice but to accept them.

Then too, private label has become a more important component in the buyer-seller relationship. Where once it functioned as little more than a price alternative to the name brand, it has become an integral part of the merchandise mix, effectively positioned as a price-value alternative to the national brand. Then, too, where house labels once functioned in conjunction with national brands, they are increasingly replacing those brands on retail shelves — especially where the brands in question are niche or second-tier brands.

So beaten down have branded suppliers become that they embrace even the smallest advances, as they have in the aftermath of the recent personnel shifts at Walmart, accompanied as they were by a commitment to treat suppliers more equitably.

What’s disappeared in the retailer-supplier relationship is the human element. Where once retail merchants and senior supplier executives often enjoyed relationships that transcended business, their relationships today too often begin and end in retail conference rooms, where suppliers are held captive to often-unrealistic retailer demands.

This situation, while detrimental to both parties, is really the fault of neither. Rather, it is simply the way business is done today, the result of short-term pressures on retail merchants to make the most profitable arrangements for their companies, and short-term pressures on suppliers to expand or retain distribution at whatever cost.

This, then, is what things have come to in an adversarial environment. However, there remains in the supplier community an exclusive group of executives who understand that retailer-supplier relationships do not necessarily need to begin and end in buyers’ offices but can extend across a broad range of industry experiences, functions and activities, many of them personal.

In another time these suppliers were commonly referred to as trade relations people, with responsibility for keeping open the lines of communication between retailers and suppliers, handling delicate negotiations, controlling damage and repairing frayed relations, particularly in stressful situations.

In this role they were less concerned about the momentary state of business with retailers than with the business situation going forward, less interested in short-term setbacks than long-term gains. More significant, they cared less about the retail organization than about the people within that organization, people with whom they had real relationships, people for whom they genuinely cared.

The trade relations designation and many of the functions associated with it have fallen into disuse, replaced to a significant degree by a senior sales executive whose responsibilities now encompass, however tangentially, trade development.

However, several supplier companies continue to view effective trade relations as critical to their success. The very best trade relations practitioners — Energizer’s Lou Martire, Hallmark’s Vince Burke, Unilever’s Jerry Brown, Time Warner Retail’s Joe Bivona, Hershey’s Tom Joyce, Nestlé Purina’s Paul Cooke, Kellogg’s Dave Jones, and Pharmavite’s Skip Aldridge, among others — have made strong retailer relations a cornerstone of their companies’ success. They have managed to maintain retailer contacts and keep communications channels with their retail customers open even in the face of SKU reductions, excessive retailer demands, and unrealistic brand deletions.

As well, a handful of senior executives with sales backgrounds or training — L’Oréal’s Karen Fondu, Alva/Amco’s Jeff Gerchenson, Gallo’s Herb Smith, Johnson & Johnson’s Frank Maione, Profoot’s John Vayianos come readily to mind, though there are others of equal ability and sensitivity — also grasp the importance of retailer relationships in the sales equation, to the extent that their trade relations skills often determine and dictate their sales approach to individual suppliers.

The point of all this is twofold: First, trade development has become a neglected art in these days of strained retailer-supplier relations, and both parties are losers as a result. Second, amidst this decline, those enlightened supplier companies that have continued to recognize trade development as essential to their sales effort have, despite occasional short-time sales setbacks, managed to maintain or enhance relationships even with those retailers with whom they currently have issues.

Truth is, relationships between retailers and suppliers in these difficult times have become more important than they’ve ever been.

Those supplier companies that don’t recognize that reality or have been forced to ignore it in the face of increasing cost pressures have done themselves no favor. Those, on the other hand, that have remained true to the premise that productive relationships with their retail customers often turn on a strong trade relations component have largely survived a very challenging year in the mass retailing community, and have emerged from this very stressful period in a stronger and more viable position than they inhabited a year ago.

Finally, though it doesn’t really need to be said, those senior supplier executives who continue to approach their jobs from the perspective not of business but of relationships have enjoyed a more fulfilling experience than their counterparts — and have made some lasting friendships along the way.