When the consumer is in control how should retailers react?

September 14th, 2009

What retailers do in a down market with their suppliers can have a huge impact on their future including staying in business?

Retail is a tough business to begin with. The supermarket business vertical in general is a net one percent business and has been for as far back as one would care to look. As such, the impact of a down market can have an immediate impact. So it just makes sense that during tough economic times those retailers and their suppliers have to continually shuffle their priorities in order to keep the doors open.

In an article in the Arizona Republic titled Lessons of recessions resonate with retailers by Anne D’Innocenzio of the Associated Press it was stated by Michael Niemira the chief economist at the International Council of Shopping Centers that 143,000 retail stores closed last year and that 140,000 would close this year followed by 135,000 in 2010. That’s a total of 418,000 stores.

That is some major hunkering down. Retailers very quickly retract to profitable operating areas, profitable stores and profitable products. Some are forced to enter bankruptcy for protection. Supplier relationships become extremely important. However these business environs are no friendlier for suppliers whose business is also shrinking and could leave retailers without a source of supply if they go into bankruptcy or worse out of business.

It is precisely at this time that retailers should be looking for alternative sources of supply. This does not mean they have to change sources of supply, but a backup plan certainly makes sense with the potential impact that a lost source of supply might have. With the forward looking forecast for store closures to continue through at least 2010, there is still a need to protect and increase your view of the available supply chain.

One way to do this is through the use of e-negotiation tools. Specifically supplier databases. A sensible place to start is with your existing procurement tools provider if you have one. If you don’t; now may be a good time to review alternatives available specifically for retailers.

Some characteristics retailers should look for in a supplier database might include but are certainly not limited to the following.

1. A database of retail suppliers
2. Availability in the form of SaaS
3. The size of the database
4. Search Flexibility
5. Export Parameters
6. Category structure
7. Sub category structure
8. Additional data elements
a. Safety focus
b. Environmental focus
9. RFI data

Retailers should remember that much the same as they are trying to protect their customers and market share with coupons, discounts as well as any number of continuity and other marketing programs that all suppliers are doing exactly the same thing. Suppliers that you are not doing business with have programs and discounts to offer in order to attract new business. Your existing suppliers are offering the same. This may be the best time ever to explore these opportunities.

We look forward to and appreciate your comments.

Ron Southard

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