Independent assortment management consultant Yekaterina Buzukova discusses the conflict between the supplier, seller and buyer that arises in the views on the “right assortment” and offers a methodology for creating an assortment that meets the needs of all three parties.
Ekaterina Buzukova is a leading Russian retail assortment consultant, category management specialist, business trainer, seminar leader, author and co-author of the books “Assortment management in retail.
Category Management ”,“ Merchandising ”and“ Purchasing and Suppliers ”.
Different tasks - different approach to the assortment
The conflict of interests of the parties lies in the fact that the supplier and the retailer have different approaches to their assortment. The main strategy of both is selling. all. But at the level of formation of this “total” approach, companies have different approaches. Who is at the end of this chain? Buyer. An ordinary average person with a cart, tiredly wandering around the store. He does not even suspect what battles flared up before he put mayonnaise at a discount in his cart ...
The supplier wants the retailer to sell whole his assortment (and preferably only him and no one more and preferably with a maximum margin). Retailer wants to sell different goods (preferably cheaper to buy and sell more expensive). This is not a retailer’s whim or his desire to manipulate a supplier. This is the retail response to the buyer's desire to purchase an assortment (that is, many different products of different brands in one place). Giving customers a choice is the essence of retail, its key purpose. The supplier must remember that the retailer is much closer to the buyer, since he has the opportunity to directly hear his customer requests (if he wants to hear them, of course).
How convenient is the buyer? We intuitively divide the product into categories. In fact, a person is guided by his needs when buying goods - “I want to drink,” “I need sour cream,” “I need boots for the winter,” and so on. Recall the famous expression: “The buyer does not buy a drill. He's buying a hole in the wall. ” That is, in fact, the buyer is not so important what exactly he will make this hole - it is important that the main need is satisfied. This category closes the need - to quench your thirst you can buy juice, mineral water, tea or beer. Having chosen a category, for example, juice, a person already within the category will begin to choose a product - by brand or price or taste. But initially the category is selected. And the choice of a brand is already the result of a properly built promotion policy on the part of the supplier. It must be remembered that the buyer needs a choice (or at least the illusion of choice). Some people need cheap juice, others more expensive, some like apple juice, others like tomato. This is where the essence of the retailer is manifested - to give the buyer a choice.
Conflict of interest
What is the result? The task of retail is to provide the buyer with a choice, and the task of the supplier is to promote their product. There is a conflict of interest. The buyer says "my store is not rubber (and this is true), I can’t buy all your assortment, I must have other brands and other suppliers." The seller replies: "It is necessary that my entire assortment was on your best shelves and there should not be any other similar brands (because for the supplier other brands are enemies of everything)." To resolve the conflict, all the procurement tools are used - tenders, bonuses, kickbacks, manipulations, the Law on Trade ... Moreover, it is used with varying success by both parties ...
In principle, a conflict should not arise. For it is decided simply, in favor of the end user: does the buyer need this in the store or not?
To give the buyer a product is the task of retail. And making the product meaningful for the buyer is exactly the task of the manufacturer. Why is Procter & Gamble so successful? Because it (among other factors, of course) offers different needs in different categories, in different price segments, in different brands and different packages. The buyer often does not think that a diaper for a baby, shampoo, washing powder and mascara are one hand.
Another example: Coca-Cola. Why is it successful, although it does not have such a wide differentiated assortment? Because she is the leader of the category. The category and brand coincide in the perception of the buyer: "Cola she is cola." Chupa-chups, Barbie, diapers, copier - all these are examples when the category and brand in the perception of the buyer are equal. This happens when the manufacturer creates a new product, a new category, as Xerox once produced a copy machine, thereby securing its brand as the name of the product category.
As a result, we see that the supplier can take a leading place on the shelf of the retailer, taking the leading place in the perception of the buyer. But this is brand management, and its tasks are different from category management.
But what about the wholesalers? Those companies that do not produce goods, do not engage in branding, do not have direct access to the consumer? How do they shape their assortment?
They just need to understand what are the main factors for the buyer when choosing a product. A brand, a price (moreover, price is not a way to reduce costs - is this always a problem for the purchaser and it is solved during negotiations. And is price the factor of choice for the end customer) or some other properties of the product? After all, the buyer in this case makes decisions about the assortment. Having delved into his needs, you can offer your goods.
“I need three well-known brands: leaders in the market, in the middle price segment, quality products, including new products and promoted products. I also need two brands with a low price, worse quality, but what would fly in huge quantities. I don’t need expensive goods at all, they don’t buy from us. ”
Can your company offer this whole package? Well, you can negotiate prices and terms of delivery. If your assortment does not have any goods, then a competent buyer will turn to other wholesalers.
This is ideal. This is if the buyer knows exactly what he needs and does not follow the lead of an experienced seller (or his own greed and incompetence, which is a sin to conceal). Otherwise, we do not have the goods that the buyer needs, but the goods that were sold (read “steamed”) to the buyer. Result? Unbalanced assortment in the store, illiquid assets, returns, loss of customer loyalty, distrust of the supplier, lack of development prospects ... well, and as a result, a drop in sales. And all because the conflict of interest between the supplier and the retailer was not resolved in favor of the end consumer.
How to find the intersection of interests?
The supplier (it does not matter whether he is a manufacturer or a wholesaler) must understand the place of his goods in the general assortment of the retailer. For example, the manufacturer of toothpicks can be proud of their product and “click” on the buyer in every way so that he chooses the entire assortment in the planned volume. But for a retailer, this product occupies such a small share in total sales that, most likely, the buyer will have three to five similar purchasing channels, not even thinking about developing relations. If the share in the turnover of the retailer of the supplied goods is large, significant, then it is necessary to strive to occupy a leading place in the heads of consumers, that is, to engage in branding. Then the buyers themselves will bring the brand to the best shelves in the store.
It is important for wholesalers to offer an assortment of goods that maximally covers the needs of the end consumer in the category. For example, wanting to buy a pan, the hostess will choose between several brands, choose the size and type of the pan, material (Teflon, stainless steel), price, and also color to everything else (the red pan is perfect for new curtains in the kitchen). A wholesaler offering several brands and a variety of models in his assortment has a chance to occupy a large share in the assortment of the store if he competently builds his pricing policy and has a sufficient supply of goods. Because the right assortment must be supported by at least the right price and availability of goods in stock. Knowing how the retailer’s assortment is formed, the supplier can understand how to offer their goods and where their place is in the general assortment of the store.
Assortment formation technique
For effective assortment management, there is a technique that is fair for the retailer, and for wholesale, and for production companies. The difference will be for some purposes, but the approach is the same for everyone.
1. It is necessary to build your own classifier, it is very important to structure it, distributing the product into classes, groups, categories.
2. Highlight categories. Here, a significant difference will manifest itself in what everyone calls a category: a retailer will allocate categories by product, a wholesaler - more by brand, a manufacturer - by brand or by class of product.
3. We decide how the category will be divided - by brand, or by price, or color of goods, etc. There is only one principle - we divide as the buyer chooses the goods. If he first of all asks for the brand, and then the price, and then the color, then this is exactly how you need to structure your assortment and present the goods in the hall or catalog.
4. Define the role of categories. You need to understand what each category in your assortment means. There is a recommended percentage of categories with different roles.
This is where the main difference between the assortment policy of the retailer and the supplier appears: the fact that for one it will be a seasonal product, for another it will be a priority. This is where the main conflict appears: the supplier shouts with all his might: “We have this product a priority! We make money on it! We need to sell it! ”And the retailer says:“ But I have it seasonal ... you won’t do anything ... ”. Therefore, to know the role of your product in your assortment and in the assortment of the store is the cornerstone for further understanding.
5. See the ratio of products within a category. Each product is for its own purposes: some make a turnover, others make profit, others for image, fourth for increasing the average bill ... At this stage, it becomes clear what products should be on the store shelf and what products should be offered by the supplier.
Next comes the pricing, layout and promotion of goods - all in accordance with the goals that we have identified above.
Assortment building using this technique is effective for any company, regardless of its trade specifics. Knowing this technique, the supplier himself can build and balance his assortment, make it harmonious and successful. The retailer sees better the needs of its customers and can shape the range according to its needs. The supplier understands the role of his product in the assortment of the retailer - you can give arguments for buyers and correlate the development of your assortment in accordance with the retail matrix.
Of course, conflicts at the level of “they brought us something wrong again” cannot be avoided. These are tactical daily minor conflicts that were, are and will probably be for a long time to come. But strategic battles can be avoided by properly assessing each other's interests. The assortment in the store should be “right” - primarily for the buyer. Then both the purchaser and the supplier will be satisfied with each other.
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