Argos and Homebase are the most recent examples, demanding a 2 per cent rebate from suppliers to “support the transformation” to a digital-first retailer, according to a letter seen by The Telegraph. They join the likes of Debenhams, Laura Ashley and John Lewis who are all believed to have asked for discounts from suppliers.
It is not hard to see why retailers are demanding more from their suppliers. Take Home Retail Group, which owns Argos and Homebase. It emerged as one of the Christmas “winners”, with like-for-like sales up 3.8 per cent at Argos and 4.7 per cent at Homebase.
However, its profits remain well below levels seen before the recession. Plus it, like many other retailers, is being forced to change as the high street adapts to the rise of online and mobile shopping.
There are also other factors at play here, in particular a fundamental shift in how people shop. Consumers are increasingly polarising towards discounters for the everyday and premium retailers for special occasions.
Speaking at the recent retail marketing conference held by Popai, Mars’ in-store marketing controller Andy Page dubbed this the rise of “mercurial consumption”, with shoppers no longer tied to a brand or retailer and instead looking for value, whether that comes from a low price or high quality.
That opens up new challenges for retailers in attracting consumers and proving value beyond promotions. What is needed is innovation in retail and that starts with marketing.
This is where suppliers come in. They know their brand, products and customers better than anyone and can come up with inspiring and innovative ways to market in-store.
Rather than putting them under pressure, retailers need to unlock their knowledge. They can share insights and work on activations to excite customers.
This is also a 2-way street. Suppliers need to understand retailers, what works for them and what makes their lives easier. That includes retail-ready packaging and formats that work in all stores, from convenience shops to department stores.
Coke is a prime example of the right strategy. With the launch of its “Share a Coke” campaign it used above-the-line marketing for promotion and then worked with retailers on in-store marketing to make sure the bottles were highly visible in stores, helping to drive conversions and boost sales.
The key is an integrated approach from the retailer and the supplier. As Page puts its: “We live in a world where there is always a sale, it’s how we make value cut through that matters. We have to get consumers excited in store, give them a brilliant retail environment, offer retailtainment. And to do that we have to work together.”
I couldn’t agree more. Yes suppliers must “support” retailers. But the way to get them doing that is not necessarily with rebates and demands but with co-operation and shared expertise.
The speakers at Popai admitted they don’t see the relationship between suppliers and retailers as one of partnership. Perhaps they should.
If you have a great case study from 2013 why not enter the Retail category in the Marketing Week Engage Awards 2014. Find out more here.