Should suppliers spend more with independents?

Suppliers are spending more and more money on trade promotions. And the more they spend, the more keen they are on compliance – the measure of how good retailers are at delivering the supplier’s promotion.

Mostly, suppliers assume that multiple retailers are better at compliance than independents, which means that local shops lose money from the start. But this is a notoriously subjective area, and few suppliers share their data with their trade partners.

This makes a new survey from the USA quite interesting. AMR asked suppliers to rate how good retailers were at compliance on a ten-point scale. The grocery channel rated OK, with a best score of 6.1 on price promotions and a worst score of 2.3 on cross-category promotins such as meal deals.

According to AMR, the most money is wasted on special events, where difficult-to-execute promotions (including floor displays and customised products) snagged in part because they added complexity to the supply chain.

For local retailers who want to take part, there is an opportunity if they can work with their key suppliers (buying groups and/or wholesalers) to develop specific promotional opportunities around known shopper behaviour. The first step is to discuss with your business development executive what information they hold, or need to hold, in order to sell a promotion for your shop.

It is partly about scale, which means that you need other local shopkeepers to be like-minded. It is also about being realistic. Until the independent channel builds a track record, it is still likely to trade in the shadow of the multiples. But you can take encouragement from the fact that the multiples still score so poorly.