Want to know what’s going on at retail? Ask the supplier community.


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Inside This Issue - Opinion

Suppliers eye the retail scene

March 29th, 2010
by David Pinto

Want to know what’s going on at retail? Ask the supplier community.

Suppliers, as a group, know as much about the current retail landscape as any retailer. Not only do they know, they have opinions about their various retail customers — off the record — opinions based, of course, on the retailer’s importance as a customer, but also on the ease of accessibility to the retailer’s merchants, a retailer’s willingness to introduce exciting new business concepts and programs, the retailer’s “likability,” the retailer’s readiness to see the supplier’s side of things, and several less tangible measurements.

With those guidelines, here’s what suppliers are saying about …

• Walmart. Change is in the wind at America’s largest retailer. The program to reduce SKUs and upgrade store layouts and fixtures has met with a mixed response from consumers. This opinion appears to be supported by the results for the most-recent quarter, when comparable-store sales in the United States, excluding fuel, fell by 1.6%.
The changes about which suppliers are speculating, however, have as much to do with people as with programs. Prevailing opinion has Walmart making serious personnel moves between now and the retailer’s annual shareholders meeting, scheduled for June 4. Some forecasts even have the retailer announcing major changes at the
meeting.

• Target. The nation’s No. 2 mass merchant continues to struggle in its relationships with suppliers. Indeed, Target, according to the supplier community, battles suppliers more frequently and contentiously than virtually any of its competitors, often over matters that many would describe as trivial. This posture, again according to suppliers, tends to hurt this otherwise peerless mass merchant by keeping products off the retailer’s shelves that deserve, by all logic, to be there.

• Walgreens. America’s largest drug chain has emerged, in recent months, as the suppliers’ favorite. In large measure, this is due to the perception that Walgreens is now the underdog, struggling to catch CVS Caremark as the most important drug chain in the supplier portfolio. As well, Walgreens is given credit for the innovative programs it has introduced over the past year, programs designed to make the retailer’s stores more relevant to today’s consumer, more shoppable and more
competitive.

Withal, suppliers are struggling with the suddenness and frequency of the retailer’s recent personnel changes, many of which have involved staffers the supplier community had clearly embraced. Most recently, the departure of divisional merchandise manager Eddie Frail, whom Walgreens had brought to Chicago only last year — Frail had previously worked at Walmart — has further confused those suppliers who had quickly come to admire him both personally and professionally.

• CVS. Suppliers continue to scratch their heads in their dealings with CVS, primarily because they remain uncertain what the drug chain expects from them — and what they stand to gain in return.

However, there is little disagreement in the supplier community about one thing: Walmart aside, CVS is the mass retailer that provides the biggest return on their investment. Indeed, rare is the supplier list of leading accounts that doesn’t have CVS solidly positioned in the top five.

These same suppliers wonder, however, how much more volume they could be doing with CVS if the sometimes contentious relationship they now endure were to be replaced with a more equitable partnership.

• Kroger. Though occupying the position as America’s largest grocery chain, Kroger often fails to play the part. Characterized as aloof, indifferent and sometimes disdainful of supplier relationships, Kroger, like Target, sometimes misses exciting and profitable merchandising opportunities simply because the retailer’s merchants are not sufficiently engaged with the supplier community — or curious enough to try new programs. This is especially true in the H&BA and general merchandise categories, where the supermarket retailer’s emphasis on food often gets in the way of the nonfoods effort.

Suppliers often contrast this behavior to that of the nation’s innovative food retailers — operators like H.E.B., Wegmans, Publix, Hy-Vee, Food Lion and, a recent addition, Winn-Dixie — to point out some of the exciting and profitable departures that can be attempted with general merchandise in a grocery setting. However, it is also true that Kroger is among the most important accounts for virtually every major H&BA and general merchandise supplier.

• Safeway. See Kroger above.

• Rite Aid. If the supplier community is rooting for any one mass retailer, that retailer is Rite Aid. For several reasons: First, most people root for the underdog — and competing against Walgreens and CVS, Rite Aid is certainly the underdog. Second, CEO Mary Sammons is among the most admired and best-liked senior executives mass retailing has yet employed. Indeed, it would be rare to find a supplier with a bad word for Sammons, who will step aside as Rite Aid’s CEO later this year, to the chagrin and disappointment of her many supporters.

Finally, Rite Aid’s merchandising staff is also held in high regard by the supplier community, which continues to hope that the drug chain will begin recording monthly sales gains before too much more time passes.

• Regional retailers. Supplier favorites, based both on retail performance and on the likability of the staffers with whom suppliers interact most frequently, are Duane Reade (in an astonishing turnaround that has a drug chain that, until recently, suppliers dismissed as irrelevant suddenly emerging as one of the supplier community’s darlings), Kerr Drug (boasting an executive and merchandising staff second to none in professionalism and likability), Bartell Drugs (ditto), Publix, Food Lion and a bunch of others that are just plain fun for the supplier community, even if their business ranking isn’t necessarily in the top 10.

If you doubt any of these opinions, they will happily be verified by any supplier — provided the response is kept off the record.

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