9 changes for a better future in the retail-industry relationship

Vicious cycle                                                                                                                     Virtuous cycle

Sell-in budget                                                                                                                              Sell-out budget

Pushing inventory to retail so they don’t stock up from competitors                             Sell-out budget

Sell-in budget                                                                                                                              Sell-out budget

Sell-in budget                                                                                                                              Sell-out budget

Sell-in budget                                                                                                                              Sell-out budget

Sell-in budget                                                                                                                              Sell-out budget

Sell-in budget                                                                                                                              Sell-out budget

Moving beyond the transactional

The path forward requires moving beyond purely transactional discussions, i.e. those still limited to buying and selling. “Instead of each side only thinking about how much they’ll sell, they need to discuss how much they can grow together,” summarizes Bruna Fallani, a strategic consultant and advisor for retail and consumer goods. She notes that, while these conversations may already exist, they cannot be one-off: a relationship culture needs to be built between retail and industry.

This doesn’t mean putting an end to the transactional perspective but rather adding intelligence to this process and bringing other areas beyond commercial into the game – such as marketing, trade, CRM and data analysis. This is all to maximize joint results and strengthen the shopper experience.

15% of retailers still aren’t sharing information

Even when exchange does exist, a clear need to mature this collaboration emerges: less than 40% consider competition when analyzing data, according to Integration Consulting

A perfect match for data intelligence

For Diego Cicconato, data sharing and alignment help solve some of these issues, introducing transparency into the relationship and allowing for deeper strategic alignment.

Bruna Fallani notes that sharing information is essential for building a relationship based on trust. After all, industry players have serious interest and capacity to understand their consumers. While retail offers the input – i.e. information about who the customer is – what’s missing is joining these two types of expertise together and making the match.

Governance and a focus on results

What is, ultimately, the most suitable model for a retail-industry relationship? The answer may lie in a performance-based approach, as recommended by Andrea Aun, partner at Integration Consulting: “This is about moving from tactical to results-based levers.” Andrea notes that while extra display points, facing and other tactical actions will always be present, these must be carried out within a larger overall strategy aimed at capturing results. Common objectives need to guide actions, such as margin composition, profitability increase, share growth etc. – and always mutually aligned.

In the presence of joint business planning (JBPs), plans tend to be more robust and encompass the complete vision for a given year. While this may not, of course, be feasible for all suppliers, it is certainly possible to translate certain JBP elements into a monthly trade-off plan. As Andrea notes, governance is indispensable in all of this, making a huge difference in ensuring the success of joint plans between retail and industry partners. Ideally, she says, structured monthly governance should be in place, including bilateral meetings and, of course, mutual trust in

sharing data – enabling partners to quickly identify any necessary adjustments for achieving the outlined objectives. This entails integrated work, which shouldn’t merely be relegated to the point of sale.

When you can’t customize, personalize

With experience on “both sides of the counter” (in retail and industry), Diego Cicconato from Retail Think has realized that, given the complexity inherent to distribution and the level of capillarity in the national market, seeking to create customized plans is utopian thinking. While these are welcome (and very much so!), they’re not always viable. Despite that, it’s possible to achieve some level of personalization, including in supply chains served primarily by distributors.

The path to a virtuous cycle in retail-industry collaboration demands focus on performance, but also a clear understanding that these relationships need to be continuously maintained. “The next frontier is transforming data into dialogue and continuously making the best choices for both – while also satisfying shopper needs,” summarizes Bruna Fallani.

Bruna Fallani – Strategic Consultant and Advisor for Retail and Consumer Goods

“The shopper is a point of convergence between industry and retail. Whoever manages to place the customer at the center will maximize results.”

Andrea Aun – Partner at Integration Consulting

“The beverage industry has proven itself to be more advanced in aspects such as a focus on results, rigorous governance and payment for performance.”

Diego Cicconato – CEO and Partner at Retail Think

“The lack of alignment between retail and industry is measured by Nielsen data, showing that 65% of promotional actions don’t deliver results. If promotion investment is around 10%, this means that 6.5% of retail revenue goes to waste. It doesn’t make sense that both sides are failing to sit down and design plans that generate results and serve customers well.”

Case 1

Industry helped personalize plan in retail chain served by a distributor

A regional chain multiplied its revenue several times over with a beverage segment in a project that included Diego Cicconato, CEO and partner at Retail Think. Service happened via a distributor, and the industry side got involved in personalizing services, which included changes to the category layout, the inclusion of POS with chilled beverages, among other actions carried out after extensive data sharing.

Case 2

Focus on profitability solved issue for coffee section

In consulting work for a retailer suffering from profitability well below the ideal in the coffee segment, Bruna Fallani called in 3 industry players to discuss with the retail chain how to improve category profitability. Results were enhanced via changes to the mix, trade actions, execution improvements and additional promotion – initiatives defined so that the volume-driving brand would continue to fulfill its role but also add value with other portfolio items. The other industry players were responsible for adding options without cannibalizing sales.