At HIM we’ve talked before about the modern challenges that convenience retailers face. Legislative changes, increasing competition in the convenience sphere from less traditional players and rising expectations from shoppers are significant obstacles that retailers have to contend with.
These factors are squeezing bottom lines as retailers work a complex balancing act. Understanding the mind-set of our symbol and independent retailers is thus imperative to meeting their needs and creating solutions to appease their concerns and supporting successful business practises.
This isn’t the only reason it’s important we understand our retailers opinions and behaviours. After all, for brands, retailers are customers too. If your products aren’t available on retailer’s shelves then there is no chance of them ending up in shoppers’ baskets.
Across the symbol and independent convenience sub-channels it’s our store owners and managers who get to make the decision on whether a product will be stocked in their stores or not. It is their decision processes that we need to be influencing.
Shopper and consumer insights play a significant role in any supplier decision – enabled by the plethora of data points available. However, understanding the factors at play and retailers’ decision hierarchy for or against stocking a product is more difficult because retailer information is less readily available.
According to Jill Livesey, MD of HIM, "Opportunities are abundant in this channel and it’s crucial that suppliers and wholesalers understand the wants and needs of the independent operator in order to help them achieve success". It is for this reason that HIM conducts annual research into the Wholesale channel.
HIM’s Wholesale research spans the cash and carry, online delivered and telephone delivered routes to market. Quantitative interviews are conducted with retailers and foodservice operators using these routes in order to understand the customers, what their priorities are and where their dissatisfactions lies. We delve into topics like range rationalisation, effective communication and pricing in order to truly understand the thought processes of the wholesale customer.
THE ORDERING PROCESS
Conducting research in order to understand the wholesale channel through the eyes of retailer and foodservice operators is something HIM has done since 2001.
This has allowed us to identify changes in behaviour and demands. Now though it may not have the reputation of the fastest moving channel, even in Wholesale the only constant is change.
Take the ordering process for example. 10 years ago many wholesale customers were waiting by their phones for their wholesaler to call them in order to place their order! Now customers are of course much more proactive, encouraged in part by technological advances.
The move away from telephone towards online ordering has been significant over the last few years. Now 87% of retailers using the delivered route to market say online is the main method (vs telephone) they use to place their wholesale orders.
This change is allowing for increased efficiencies via a web-based approach. For foodservice operators the same pattern has been seen year-on-year. However, the use of online as the main RTM is lower amongst caterers at less than 40%. Clearly, there is headroom for significant movement from telephone to online ordering amongst this 4
customer base. However, their lack of ‘back office’ space and tendency to walk around the pantry while placing orders for delivery means that foodservice operators are likely to bypass computer ordering and move straight over to mobile app purchasing.
CONTROLLING COSTS, PRICING AND MAXIMISING MARGINS
Changes are not only occurring in route to market behaviour but also in their ‘shopping’ behaviour. With the push and pull factors putting increasing pressure on operators it’s important to assess their outlook and confidence levels in order to understand what is driving their decisions.
We know that over the last few years pressures on both retailers and foodservice operators mean budget setting is becoming more commonplace while they order the stock for their venues. This change in behaviour is likely to continue over the next few years as pressures mount.
Consistency is key for retailers when it comes to controlling costs. Some brands and wholesalers are already tapping into this mind-set. One example is Appleby Westward (SW Spar distributor), whose wholesale Every Day Low Price (EDLP) initiative on milk, wine and beer saw company owned store sales increase 10%, 37.5% and 8.5% respectively, as it gave retailers the confidence to competitively price their products against larger grocery players. Our research showed that this type of pricing strategy is popular amongst retailers.
Consistency also benefits suppliers as it avoids peaks and troughs in their wholesale margin which occur when products go into promotion in wholesalers with the use of mechanics such as multi-buys and price reductions.
Promotional mechanics are often used in cash and carries and in online banner ads to catch the eye of retailers and encourage either an impulse purchase or a trade from another brand. But if EDLP is a serious strategy being considered then other methods of POP influence will be needed.
DELIVERING EFFECTIVE COMMS AND INFLUENCING AT POP
Our year-on-year research shows that the majority of retailers are still working from shopping lists. Albeit the format of shopping lists are becoming increasingly digital – either made on phone notes pages, wholesaler apps or simply made up of photos of products taken off the shelf. This continuation of list-making behaviour makes it an incredibly important time for suppliers stand out online and in depot.
Investment in engaging with the independent trade can be a minefield, with many methods and so much to talk about. HIM aims to help ease the path and provide the keys to deliver effective engagement to drive increased sales.
With retailers and foodservice operators switching between different routes to market throughout a month, communicating via multiple platforms will maximise the blurred channel opportunities. Cash & carries and delivered wholesalers will need to take different approaches to their communication methods, making sure communication is shared primarily on the platforms their users are saturating the most.
However, as we have previously established customers are increasingly shopping around and there has become a blurring of the lines between channels, therefore suppliers should try and exploit this by offering a bridge between the offline and online wholesale worlds in terms of communication.
Given the huge amount of traffic to wholesaler websites, here lies massive opportunity. On average, over half of users visit every day - often without even making a purchase. As a result, wholesaler’s website can be an extremely powerful communication tool.
As retailers move freely online, clear communication on best seller, NPD and promotional pages as well as site banners, will easily enable retailers to manoeuvre themselves onto your product page and put your items onto their list or into their baskets, whether that be during the online order or when they next visit a depot.
Nearly one tenth of retailers say their biggest frustration when on a wholesaler’s website is the inability to find NPD and promotions, make these clear and avoid PDF pages of promos and NPD that do not have an option that instantaneously allows retailers to add the item to their online basket/shopping list.
RANGE RATIONALISATION AND DE-RISKING NPD
New product development is one of the biggest on-going investments of any supplier but it can also be a risk to the operator when choosing to stock or not. The number of SKUs that retailers stock tends to be relatively high; a combination of core range, extended choice lines, local products and newer, more innovative products.
With such small stores, convenience retailers must be forgiven for trying to cram in as much choice as possible into their aisles. Logically, how else will they compete with the supermarkets, discounters and fixed price retailers fighting for the same shoppers? Actually, a more rationalised range can bring a number of benefits to a store, including improvements to ease of shop and product availability – factors we know are priorities for convenience shoppers. Education and justification is key to making this point.
When retailers rationalise their range a number of factors need to be taken into consideration, namely the footfall driving qualities of the product and the product’s profitability. Traditional footfall driving categories such as newspapers and cigarettes & tobacco may not drive the highest profit margins but they do get people through the door. Meanwhile that 12-pack of Swedish berry cider that had a surge in popularity last August but has since seen a decline in its rate of sale month-on-month could be rationalised.
HIM data suggests that for a good portion of retailers, the decision to delist products to make way for new products is not being made. The result is cluttered, difficult to navigate stores. The potential for improvement here comes with suppliers building in range rationalisation measures to the educational pieces around NPD. Vitally this has to be impartial and must take into account the retailer’s knowledge on sales rates and customer preferences in order to gain trust from retailers.
Conversations between sales reps and retailers around stocking new products can be difficult – despite this being one of the most effective ways of encouraging retailers to try out new lines. Retailers are often hesitant to trial new products because of the risk of unsold stock. As suppliers it is your job to address two major barriers: convincing retailers a product will sell and ensuring the initial risk for a retailer is minimised.
Our latest Wholesale insight has been released for 2017 and we will be working with our varied client portfolio, equipping them with insights to guide investment decisions.