The Retailer component of the 2021 Drinks Association & Advantage Engagement Program, where retailers provide feedback on how their supplier partners have been engaging with them over the last 12 months, is now complete.
Not surprisingly, the key themes from the feedback at the headline level have been influenced by how suppliers have responded to impacts from the pandemic, managing rapid changes in consumer and shopper behaviour, increased operational complexity and disrupted supply chains. However, also not surprisingly, there is a great deal of relevance in the themes of productive ongoing relationships beyond short-term responsiveness to crisis demands.
We know from our global research that feedback can be meaningfully grouped into four quadrants: Partnership, Execution, Reputation and Vision. This is how we will associate the key themes from this year.
Partnership: Resuming Joint Business Planning Focus
Business disruption through the past 18 months has forced an increased focus on the near future and solving immediate problems.
One of the key themes for Retailers from the Supplier feedback recently reported by Advantage was that suppliers had a great deal of positivity towards retailers’ ability to lift their planning horizons beyond the day-to-day fire-fighting, and to get back to processes and engagements which drive category growth.
The Retailers’ assessments of how suppliers have similarly been able to lift their planning horizons has not been as positive. They are looking to suppliers to re-establish joint planning practices with Suppliers, refocusing on initiatives to drive growth through the coming year and beyond.
One Australian Liquor Retailer commented, “This supplier has refocused on their joint business plans with us. They have been quick to agree and move forward. This makes it easy to target our mutual objectives for the financial year. Early engagement and alignment remove conversations throughout the year and allow us to focus on the right things.”
Execution: Managing supply and demand volatility
Retailers are empathetic to the challenges posed by increased volatility on both supply and demand, however expectations on ‘how’ suppliers manage this remain high. Beyond the DIFOT measures, Suppliers who have been recognised as out-performing in this area have demonstrated two important capabilities in particular.
The first is the capacity to build and execute contingency plans to keep up stock availability. Practices such as building safety-stocks or implementing a higher frequency of monitoring and acting on demand signals were appreciated by retailers.
The second is regarding communication, both the proactive notification of supply issues made prior to them actually impacting the retailer, and routine updates on progress to address issues.
Both have been very clear differentiators of best-in-class logistics collaboration.
One Australian Liquor Retailer said: “A lot of lessons have been learned this year. Adapting quickly to changes in demand and promotion response has become even more of a vital skill. Suppliers need to manage forecasting dynamically. Certain suppliers are able to manage adequate safety stock holdings and others are not. Shipment issues will continue, and suppliers need to have plans in place for their business to ensure supply moving forward.”
Reputation: Co-creating for the future
Retailers want suppliers to invest in up-skilling the capabilities which are emerging as future requirements for doing business. The scale and pace of change in the market, and the significant impacts this will have on retailer-supplier engagement, will require effective collaboration to manage for mutual benefit.
The best example of this is e-commerce capability. Retailer investment and focus on their e-commerce platforms and digital traffic remains central to their strategies as shoppers continue their fast migration to the online channel. The impact on supplier reputation, and commercial results, from capability built and the engagements driven in this area, will likely continue to grow.
Of future collaboration in the digital space, one Australian Liquor Retailer commented: “Historically, the retailer-supplier relationship model has been quite simple. Up until recently, there was no e-commerce, digital, artificial intelligence or personalisation. It was pretty easy and straightforward to transact together. However, the world has changed, and we need to change and adapt to how we work with suppliers.”
Vision: Understanding the evolving shopper
Compared to other capabilities, Retailers have a relatively low regard for suppliers’ category-first approach and investment in category knowledge. This lack of confidence in a category approach is making some retailers nervous about the collective focus from suppliers and urgency from them to understand changing consumer and shopper behaviours and their impacts on category growth.
Suppliers who demonstrate solid category management capability, investing to understand and respond to change, will build trust and likely win disproportionate support for their plans.
“Suppliers have a gap in their ability to understand retailers' desire to solve for both basket for today and basket for tomorrow. Most suppliers do not focus enough on longer term growth or the shape of the category. They are very much still about their brands and how they can grow their brands here and now,” said one Australian Liquor Retailer.
For suppliers, it is clear that retailers are beginning to think about your engagement with them not only in managing the business for today, but also proactively preparing for the evolving demands of tomorrow.
The Advantage Team are drawing on global insights to assist development of this approach. Our purpose is helping businesses be better together, and we look forward to working with you to achieve this aim.