I hate it when retailers tell me what I can’t do.
I hate hearing that they’ve got a “clean floor policy” and that my signage doesn’t match their color scheme.
I hate hearing that they won’t accept value-added promotions because they’d rather have us pass the savings on to them. I’d rather play in the NBA, frankly, but nobody asked me. For now, I’d rather just sell more of my stuff.
And I really hate having to put my product in their standardized clamshell packaging so that it virtually disappears on the planogram, leaving the price tag as the Cheshire Cat-like last visible point of differentiation.
So let’s pause for a moment. It may not be apparent through my naturally restrained choice of words, but I am biased. I spent most of my formative youth marketing consumer technology products through US retail, so I can’t help it. But, in the spirit of being “a uniter, not a divider,” I will bravely cross the aisle and embrace the unfamiliar to argue against my better judgment. Not to mention my best interests.
Why would I stop a vendor from shipping displays, running promotions and changing packaging? Because I don’t trust that they know what they’re doing. I’ve seen too many hastily designed displays, too many promotions that build up like expired plaque on my planogram, and too much packaging that shows how little they understand the value of real estate. From here, it’s a short leap to understand why I’d ask for “just hand me the check book” entitlement programs. Entitlements are insurance policies against vendor marketing failures. Pay me up-front. I expect you to fail.
All this makes sense until a brand shows me that they understand what I do for a living and then proves it. Show me quantitative packaging and promotion research measured against your end users who shop in my stores. Show me how you’ll forecast it, ship it, sell it through, and then clean it up after it’s done. If you can do this, I’ll test anything you want because I’ll believe that you know what you’re doing and you won’t make a complete mess of the one thing I have that you don’t – my stores.
Here’s a quick story that animates the point. At Sony in the mid-90’s, we were drowning in the blank VHS cassette business. Price erosion was 20%, we had over 100 competitors, and sell through jumped 1,000% on ad. A pure commodity business. And we were losing $20 million a year. Within a year, our #1 share position was twice that of the #2 player, we had a price premium, and we were profitable. How? Here’s how.
First, we raised our prices by 15% to give ourselves breathing room. Then, we reinvested that money into consumer promotion and packaging to boost our turns. Lastly, we delivered world-class account management, providing space management, syndicated data, and quarterly category business reviews.
The retailers that stayed with us after the price hike saw significantly bigger returns on inventory investment. Our volume dipped by 40% during fiscal ’95 and rebounded to a record year in ’96, culminating in Target running national television supporting our holiday promotion and naming us their “Vendor of the Year.”
We developed an audacious plan, quantified every packaging change and consumer promotion, and sold our retailers on facts, not feelings. We proved ourselves to our retailers, every step of the way. “Our drills were bloodless battles, our battles bloody drills.”
So it’s about trust. Trust is earned, often through painful and contentious experience. There is natural friction between vendor and retailer, just like there is between sales and marketing, Democrats and Republicans, and dogs and cats.
Vendors and retailers can both make money when more product is moving across the scanner, faster. There. That’s it. Simple. The difference is that it doesn’t have to be a zero-sum game.