Retail
WHAT A RETAILER IS THINKING

by Phil Britt

   A critical element of the sales process is understanding how your customer views you and your business. If a retail merchant views your product or service as helping him, he's likely to buy it. However, the merchant can also choose to buy from a competitor. If the decision is based on something other than price, understanding some of a merchant's considerations can help you make the sale.
   Lake West Group, which advises retailers on managing their businesses, recently recommended that merchants review their relationships with ISOs, processors and other vendors.
   In reviewing these relationships, Lake West recommends said retailers should ask themselves the questions below. If you can show how your product or service answers these questions, it can greatly enhance the chance of making the initial sale or of continuing an ongoing service.

  • Do you have well-defined processes to standardize day-to-day interactions with your vendors?
  • Are those processes documented and available to all affected parties?
  • Are these processes efficient, minimizing the amount of non-value-added activities, redundancies and rework, or do they unnecessarily bog down your merchant organization with work that deflects them from other important activities?
  • Do your processes take full advantage of your systems and organizational structure, or do they actually work against them?
  • Have you begun a formal collaborative process with your vendors?
  • Do your systems enhance your processes and organization, or are they a roadblock to them?
  • Are your systems missing key functionality that could enhance your ability to deal with your vendors?
  • Do your systems have the capability to communicatekey sales, inventory, and forecast information to/from vendors?

    "Vendors supply your products; however, they are capable of providing considerably more," Lake West advises. "They typically possess extensive knowledge about their products, the industry they belong to, the customers who purchase them, and your competitors' activities with respect to these products. Retailers having an adversarial relationship with their vendors are unlikely to garner these types of information from them. At the very least, retailers should be working with their suppliers, using this information to jointly develop programs more closely matching the desires of their customers.  Taken to the ultimate level, retailers/suppliers will engage in collaborative planning, forecasting, and replenishment (CPFR).
   CPFR is a process of collaboration between the retailer/ supplier to create a synchronized, consumer-centric, and optimized supply chain, according to Lake West. When successfully implemented, collaboration allows both retailers and suppliers to achieve efficiencies in their purchasing/ supply activities. Consumer demand is forecasted, planning is based on demand and order forecasts, and merchandise is replenished as satisfied consumers make purchases. CPFR begins with trading partners sharing information to generate one demand forecast, and initiates a chain of actions that results in both consumer satisfaction and improved profitability for both trading partners.
   "Retailers often make the mistake of trying to source merchandise from a relatively large number of vendors," Lake West cautioned. "The correct number of vendors for an individual company depends on a wide range of factors; however, trimming that number to the 'right' level is crucial. Consider the 80/20 rule here: if the majority of your company's purchases come from a small minority of your vendors, then it is crucial to understand whether it makes sense to utilize so many additional small players."
   So ISOs should try to supply as many products and services as possible, so they won't be among the "small players".