The Changing Face Of Retail Supply Chain


A good basic description of the changes faced by all retail and suppliers in today’s market is that if you missed the shifts and needs, you are either already not competitive or will soon not be. Retailers are no longer only a distribution operation run by small scale merchants, but have evolved into branded companies themselves. The role of the supplier is to help the customer to reach their respective goals of differentiation by giving tools of relevance; to the customer in the situation the customer meets the consumer. That means that the supplier should walk the same shoes as their respective retailer, and align its production according to the direction where the retailer is going, thus provide stock keeping units (SKUs) that is engineered and priced to fit the retailer’s strategy.

The traditional view of brands as sacred assets that must be allowed to exist just because they have a long history or are cherished by key officers in the organization, or by small groups of consumers at some time of the years is no argument for keeping a brand or SKU in production. Also, discount is gaining power. The discount channel is virgin land for many suppliers. A traditional view on branding as well as seeing discounters as a threat rather than a potential volume channel has hampered the development of the distributions via this channel. If suppliers do not choose to align with the needs of this specific channel, and the threat it constitutes to others, the share on the markets with a growing number of discounters will decline as every day low prices gets to be the standard on these markets.

Further, price and differentiation are two different reasons for launching a private label (PL), and the PL share is on the rise on a global scale as competition sharpens. Private Labels means that the retailer is taking charge of several functions such as marketing, certain product development and other things, and that the supplier to a large extent merely is a production facility. In special cases branded good has been converted into PL buy being offered exclusive distribution. So how do you build your brand portfolio to suit the needs of the retailer? Well, being a brand owner, it sometimes is hard to keep ones head cold when it comes to kill low performing brands, as well as seeing the potential of limited distribution for the real premium ones. An effective way is to categorize the brands and SKU according to brand strength, sales potential and the role in marketing, from a perspective where the brand fits in the retailers’ assortment.

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