2007 Issue 2

What's Happening?

I wonder if retailers understand the need for maintaining competing suppliers.  Let’s face it, in today’s retail/supplier world, only the strong prosper.  Consequently the strong retailers look to strong suppliers to fill their demands.  Those demands include not only product, but also innovation, price and ever-increasing pressure to actually help run the business. 

The genesis for this article came from a Wall Street Journal article entitled New Detroit Woe: Makers of Parts Won’t Cut Prices.  The story describes how American car companies have broken so many of their suppliers that there are relatively few left.  Those few suppliers have now turned the tables on the car companies, in effect refusing the auto maker’s demands, withholding supplies and gaining pricing power.  By forcing so many suppliers out of business, the carmakers now find themselves at the mercy of their suppliers. 

In the retailing sector, large suppliers not only have the ability to innovate and create new products, but also to change the way consumers actually live.  We only have to look at Procter and Gamble’s Swiffer franchise to see that floor care and dusting are now accomplished with  products that are vastly different from the way cleaning was done even five years ago.  P & G not only created the product but along with some powerful retailers, actually created the market.  Powerful suppliers like P & G maintain and grow market share with innovation, marketing power and the all-important shelf space.  Is there a potential long-term problem with large supplier dominance? 

Certainly, the situation for retailers is distinguishable from the auto makers in that the retailers are not pushing the big suppliers out of business, but rather supporting those suppliers at the cost of the small and mid tier companies.  The big suppliers have the power and the people to help retailers run their businesses from product to shelf.  Smaller suppliers with comparable products and at times better prices have a difficult time competing with the big guys, and are in constant shelf space crisis... 

Who can blame the retailer, since their job is to give consumers what they want?  As long as the numbers are on plan, why should retailers concern themselves with supplier diversification?  But consider this.  In five years your major detergent supplier, who now owns 80% of the business in that category, decides to double their prices because they can.  I can see it now, buyers going to market to negotiate for a larger allotment of Tide Super Clean. 

There is a need for balance and a need to keep a competitive environment, not for the sake of the retailer, but for the sake of the customer.  A mix of large branded suppliers with smaller brands who often offer better prices and quicker response times will serve the customer better now and the retailer better in the future. 

 

 

It'$ The Cu$tomer, $tupid!

Enter a large regional mall outside Rochester N.Y. with an impressive entrance, valet parking and approximately 125 store fronts, services and restaurants.  Inside the main entrance is a large sign with the pictures of the mall manager, assistant manager, marketing director, and security director, which is great if I meet them at a cocktail party.  A mall directory would have been appreciated.

In this same mall, a new children’s toy store opened recently, called Hand’s On and More.  Prominently displayed on a front feature is a sign reading “Don’t Touch.”

Speaking of signs.  To all of you who want the U.S. government to start regulating the airlines due to the airline’s inability to regulate themselves, these signs, one after another, were posted at my local post office. 

“Due to the increase in postal rates, all mail received after 3 p.m. on Saturday May 12^th will require .41 postage.” 

“Sorry, we are out of the .02 cent stamps.” 

“Sorry we are out of the .41 cent stamps.”