How supplier relationships affect customer loyalty

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By: Wise Marketer Staff |

Posted on January 1, 2010

By strengthening its supply chain relationships, the independent retail sector could find itself wielding a powerful new weapon in its battle for the loyalty of consumers, according to Marcus Vallance, CEO for SalesOut.

In the small Welsh market town of Newcastle Emlyn, a war is raging. News that a prime site on its tiny, characterful high street is being offered to one of the big supermarket chains has not gone down well with local retailers, who are now fighting back with a variety of campaigns and press coverage.

Of course, similar battles take place in towns throughout the UK every year. And yet, far from being exhausted by an uphill struggle against the might of retail giants, independents are giving the fight everything they've got - including public sympathy, traffic congestion, and even a perceived risk to their town's 'heart and soul'.

But one weapon that is often missing is simple strategic information that could help smaller retailers make better choices and more effectively engender customer loyalty, protecting them against competitive attacks on their market share.

In the back offices of every major retailer there are experts crunching numbers, examining stock movements, and making comparisons between the performance of their own store against that of other branches. Having access to analytical software, they can manipulate their knowledge of customer transactions, behaviours, and preferences, and make sure they don't miss any opportunity to boost sales, whether that's by targeting a special promotion, extending a range, or introducing new lines that are selling well in other similar stores.

Independent retailers, however, have traditionally lacked such insights, relying passively on suppliers to pitch them with new products and provide them with external trend data. As a result, their experimentation in-store has always relied on incoming promotions, managers' instincts, and their own ad-hoc research.

The independents have never had access to the kind of supply chain data that the big retailers have because of the fragmented nature of the supply chain, and the relative paucity of data transparency along that chain.

But recently, suppliers, wholesalers and independent retailers have begun to form stronger bonds so that they are able to fight back. Wholesalers, for example, are now beginning to reassess the potential for them to form closer bonds with their suppliers and retail customers to better leverage their product ranges. Consequently, forging closer ties and being more willing to share sales information is a key part of this strategy.

Leaving aside their scales of economy and large budgets, one of the main advantages that the major supermarket chains have over their independent rivals is their holistic view of the market. Through integrated systems and loyalty programmes that transcend individual stores, they have been able to gather a wealth of data that helps them with timely stock procurement and smarter marketing decisions.

So, by beginning to look at their own sales figures, from across the supply chain down to individual retail stores, many wholesalers are now seeking more efficient and effective ways to collate and share similar data with suppliers and retailers alike so that they can refine their own stock management and promotions, while simultaneously improving the offering to the consumer.

In an ideal world, independent retailers would like to be able to see, at a glance, how their own purchasing figures for the last week, month or quarter compare to those of other similar stores. A useful comparison could be with other stores in the same symbol group, similar-sized stores, or even stores serving people in the same town. If, in doing this, the retailer was able to spot a missed opportunity (for example, a best-selling product which its own store is not currently carrying) it could add the line to its next order.

In other words, having visibility of comparative, up-to-date purchasing trend data would enable independent retailers to make smarter decisions, plugging otherwise unidentified gaps in their product portfolios, or adjusting the sizes or brands of the products they stock, to maximise sales, according to the performance of variations of those items in other stores.

Early examples of such data sharing have shown a potential 12% - 15% uplift in sales as a result of stocking optimum product ranges, simply as a result of being able to compare the products being stocked by one retailer against broader retail purchasing trends.

Suppliers should ideally be able to harness this kind of data as well, allowing them to work more effectively with wholesalers to extend personalised offers to individual retailers, with greater cost efficiencies and success rates than large-scale media and advertising campaigns.

Making this data available and using it in this way would bind the supplier, wholesaler and retailer in a closer, mutually beneficial relationship which could, in turn, begin to strengthen their relative positions against major multiples.

But, most importantly, consumers would benefit as well, because their local retailers would be stocking more of the products they want to buy, and often with relevant special offers.

Surprisingly, all of the required data already exists - in the wholesalers' systems. It may not yet be in a form that is readily accessible or actionable, but sharing it could potentially cost very little, particularly to the retailer.

Provided that retailers are buying from forward-thinking, information-savvy wholesalers, they stand to benefit from purchasing trend data without the need for any investment on their part. And, if they were able to access that data (for example via the web using secure log-ins) they would not need any special equipment to do so.

In essence, these closely tied groups would represent 'virtual multiples', and would be much more able to compete with the bigger retail chains. Closer supply chain ties, and a preparedness to share sales information, potentially offers a significant advantage, allowing independent retailers to fight for the consumer, boost sales, drive down costs, and regain customer loyalty.

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