In moments of uncertainty, relationships are what will help you power through. Every relationship, professional or otherwise works most effectively when you lead with empathy, reciprocity is evident, and communication flows. These dynamics are essential for any seller-to-buyer relationship to flourish.
As a brand, you want to sell as much to your retailer as possible and in return, your buyers want to sell through the most stock to the customer as they can at the most profitable margin. Most brands know that this is very often not a painless process. The need to be tactical is genuinely essential and figuring out ways of working hand in hand with your retail customer in the most effective way possible to maximize your potential, by maximizing theirs.
Before you can find ways of working hand in hand, it merits understanding things from the brand and the retailer's point of view. It seems obvious, but getting to the real fears, pains and motivators can be very tricky. At Myagi, we've built a global network of brands and retailers. Through our platform, we help them communicate, sell and grow together. This has given us a key understanding and crucial insights into their relationships, what creates friction and what keeps them flowing. Here are some of the key pain points we have encountered on both sides of the table.
What The Brands Have To Say:
‘’We don’t understand why they chose some of our products over others’’
‘’They keep asking for price cuts and longer payment terms rather than working with us to take redundant costs out of the supply chain’’
‘’They don’t invest in product training for their store personnel and can’t sell as effectively as we would like’’
What The Retailers Have To Say:
‘’Manufacturers don’t understand our business: Assortment planning, Assortment architectures, Good-better-best, Open to buy””
‘’They keep shoving too much inventory at us’’
‘’They don’t understand our cash flow’’
From these findings, it is clear that even if you have a fantastic personal relationship with your buyer, it may be the case that you do not fully understand their business, their motivations, and their fears. In the case of an unsuccessful relationship, it is almost certain that one of the main reasons for failure is a lack of understanding of that company’s commercial goals and buying process.
What You Need To Know As A Vendor
One of the first things to understand as a brand is; Is my buyer a Category Management or Merchandise Management retailer?
Category management accounts should have the ability to forecast more accurately, run much lower risks with their ranges, and thus (generally) have lower margin expectations.
Merchandise management is harder to predict demand for and once a product goes off sale, it may not come round again until the same time the following year and possibly not at all depending on trend cycles.
Understanding where your retailer considers themselves to be is a good way to manage expectations on demand, especially when you consider that one of the biggest pain points that retailers highlighted was manufacturers pushing irrelevant product ranges at them.
Know Your Contact’s Drivers
The next step to ensure you are maximizing the potential of your accounts is to ensure you are speaking to the right person. Of course, this sounds very obvious but the point here is that it is not enough to simply know who the right person is and build a relationship with them; you need to truly understand what it is that is motivating them professionally.
Do you understand the bonus structure for your buyer contacts for example? If so, great—but are you utilizing this information when negotiating with them about the price and quantity of your goods? Understand these and you understand where you can leverage and where you can’t.
Another major consideration when selling more of your product into retailers is the range architecture of your account. Typically, retailers have a split between, good, better and best products. Divided roughly along the lines of ‘Good’ (entry-level products) that amount to around 25% of sales, ‘Better’ products that are roughly 50% of the sales proportionally, and ‘Best’ (high-end or specialist) products that account for the remaining 25% or so of sales.
It is important that you understand this from the retailer's perspective so you can gain clarity on where your product would fit. If your product is just replicating a competitor’s at the same position in the architecture, it will be much harder to get it into the range. When there is limited fixture space in the store (so, pretty much always), you must ask—what is unique about your product that will mean it should have priority over other brands?
Protecting Against Excessive Payment Terms
As many of you will undoubtedly have experienced, retailers can often utilize their favorable cash flows and leverage them to add some pressure to you as a supplier by either extending payment terms or negotiating deals where early payments result in greater discounts that erode your margin.
So as brands, what can you do to protect yourself against circumstances?
With anything in business, it always returns to obvious steps that we should take when trying to generate more business and sell more to your buyers. The reality is, if you do not actually implement these steps day to day, you may be missing out massively on an opportunity to expand accounts and generate more sales with that retailer.
Identify how your sellers categorize their own style of retail
Make sure you understand the personnel structure of your accounts
Understand the bonus structure of the people you need to engage
Identify where your product fits into the assortment architecture of your account
Analyze the cash flow of your buyers
Know how to defend your brand against excessive payment terms
If you are a brand looking to improve your relationship with your key retailers in a meaningful, scalable, and cost-effective Myagi can help. Click the button below to contact us and learn how we can help.