THE CASE OF THE VANISHING MERCHANT. Bruce T. Peterson Jr. President Peterson Insights, Inc. Temporary London Address 221 B Baker St- London

Transcription

1 THE CASE OF THE VANISHING MERCHANT Bruce T. Peterson Jr. President Peterson Insights, Inc. Temporary London Address 221 B Baker St- London

2 A Mystery Has Been Taking Place Right Before The Produce Industry s Eyes! While not quite out of the pages of Sir Arthur Conan Doyle, there is a phenomenon that bears some discussion. What we have historically referred to as a produce merchant seems to be vanishing. ( or at least evolving) This phenomenon is having a significant impact on how produce is procured and presented to the consumer. Having an objective discussion about this can cause emotions to stir up! And while perhaps not elementary there are some clues that can give us insights into both what is happening, and how to deal with it.

3 The Clues, My Dear Watson! A historic perspective on traditional buyer-seller relationships. The grocery business move to publically held companies. The impact of public affairs on decision making. The influence of global retailers. How new individuals are entering the produce industry. The emergence of the marketer. What can we deduce? How can we respond? Questions?

4 The Historic Buyer-Seller Relationship Both buyer and seller had background in the business. The seller was raised in the business. The buyer often came from operations. May have started in stores as a high school job. The size of responsibility went hand in hand with experience with the items. Experience came from time and mentorship. Significant time spent in fields, terminal markets, warehouses, back rooms and coolers in stores. Relationships could run long and deep. Your word meant everything! Intuition played as big a role as analysis. Buying came from the gut. There was significant risk taking on both sides. Buyers made quantity, quality, pricing, and merchandising decisions. Stayed in category a long time. Male dominated business. Oft times, long hours. Started early, ended late. Stayed in the business a long time, sometimes entire careers. Buyers were MERCHANTS!

5 What IS A MERCHANT Merchandising- Definition : The activity of promoting the sales of good at retail. Activities may include display techniques, free samples, on-the-spot demonstrations, pricing, shelf talkers, special offers, and point of sale methods The plot thickens my dear Watson! We ll come back to this!!

6 Evidence Trail Left By A Merchant Focus on ITEMS! Pricing done to move merchandise. Seasonally right modular and promotions. Risk taking. Product knowledge. Supplier knowledge. Collaborative business planning. They are agents for the customer.

7 The Move To Publically Held Companies Historically, grocery retailing has been a regional, privately held business. In the US, almost 70% of the retail food dollar is controlled by 4 companies. ( Walmart, Kroger, Costco, Safeway/Albertson s ) From a market concentration perspective, it is looking more like the U.K. Only 4 significant privately held companies left -HEB, Meijer, Publix, Wegman s. The key here is not that more power is held by fewer retailers, but that those retailers are all PUBLICALLY HELD! Decisions are made differently in publically held companies vs. privately held companies. It s all about the stock price! Now, the plot gets really interesting my dear Watson!

8 How US Retail Has Consolidated Kroger Fred Meyer, Food 4 Less, QFC, Kings, Ralphs, Smiths, Kind Soopers, Bakers, Dillon's, Fry s, Gerbe's, Harris Teeter Safeway* Randall's, Tom Thumb, Dominick's, Genuradi s, Von s Albertson s* Acme, Jewell-Osco, Lucky s Shaw s, Star Markets (* Safeway and Albertson s merged in 2014) Delhaize** Food Lion, Hannaford (** Delhaize and Ahold have confirmed merger discussions) SUPERVALU Cub Foods, Save-A-Lot Many of the top retailers have international operations

9 The Impact Of Public Affairs On Decision Making While financial performance still is the driving factor is stock price, corporate reputation ( image) is playing a significant role. Sustainability, fair trade, GMO s, organic, buying local, grower direct, global sourcing, diversity are all topics that retailers are promoting with consumers and touting with shareholders. While most recent surveys show this as top of mind issues with consumers, the greater impact is with shareholders! Denegation of a company s reputation can have significant impact on share price. What is interesting is how little impact these issues on changing consumer behavior. They have almost become like the word fresh. Where is the competitive differentiation?

10 The Influence Of Global Retailers Most significant food retailers have expanded operations in countries other than their own. Walmart, Tesco, Ahold, Sainsbury, Aldi, Carrefour, Costco, Delhaize, and others all have global experiences. The impact is being felt in assortments ( most notably private label), consumer preferences, and sourcing. Biggest impact being seen in senior management and how home office management is being selected. Keep this in mind as the plot develops!

11 The Emergence Of The Marketer Publically held, globally influenced companies, are evolving what today s produce buyer performance looks like. Analytics are the basic for buyer decisions. Intuition and relationships have no influence on decision making because there is limited, or no experience to draw on. Buyers do not stay in categories long enough to gain valuable insights to the many nuances of the produce business. The emergence of the produce marketer is displacing the produce merchant.

12 What Is A Marketer? Marketer- Definition: A person whose duties include the identification of the goods and services, as well as the marketing of goods and services on behalf of a company. See also ADVERTISING Advertising-Definition The activity or profession of producing information for promoting the sale of commercial products or services

13 The Entry Level Produce Buyer The profile of today s entry level buyer looks something like this: years old ( Millennial) Bachelor degree required, MBA preferred Experience with a Consumer Product Group company a plus. Diverse ethnic and/or gender desired Broad interest base. Desires to move to different areas of the company.

14 Evidence Trail Of A Marketer Focus on CATEGORIES Pricing done to sustain or proliferate margin. Numerics replace product and/or supplier knowledge. Product positioning ( modular) may not compliment seasonal promotions. No risk taking. The relationship will be defined from bid to bid.

15 Merchant Vs. Marketer MERCHANT The activity of promoting the sales of goods at retail. Activities may include display techniques, free samples, on-the-spot demonstrations, pricing, shelf talkers, special offers, and point of sale methods MARKETER A person whose duties include the identification of the goods and services, as well as the marketing of goods and services on behalf of a company. The activity or profession of producing information for promoting the sale of commercial products or services

16 Key Words and Phrases Merchant - Activity of promoting sales. Display. Pricing. Special Offers Marketer Identification ( analysis). Marketing ( advertising). Producing information ( reporting) Merchants are people of activity. Marketers are people of analytics.

17 The Contrast is Neither Good Nor Bad! It s easy to get caught up in the I wish it was the way it was. It s important to understand WHAT is happening, and WHY it s happening. Business evolves. Rather than resist, adapt! Here are a few things we can deduce my dear Watson!

18 What Can We Deduce? Marketers will rely on current data to form the basis of their decisions. The numbers are the numbers and the variations with produce from season to season will not be relevant in supplier discussions for the current year. Margin proliferation will trump sales. Risk taking will be kept to a minimum. ( jobs pay well!!) Buyer commitments will depend upon whether or not that buyer remains in the position long enough to act on it. Produce is not a living thing, it is a number in a category analysis. More emphasis will come from areas outside of the product itself, IE: packaging, fixtures, social issues. All of this is happening NOW, but the Marketers don t see it as they have no perspective.

19 How Can We Respond? ( As a Supplier ) Be skillful in analytics. Know your numbers! Be properly positioned in social issues. This won t gain you advantage, but it will be the price of staying in the game. Document understandings. Know that buyers will change. Get into stores! Look for obvious opportunities. ( they are everywhere!) Diversify your portfolio. Play in all channels of distribution. Diversify your sales team! Mirror your customer. Remember that change happens on the periphery of business segments. Look for innovation at the fringe, not the core.

20 How Can We Respond? ( as a Retailer) Recognize that your suppliers may know more than you do! ( don t worry. This only hurts for a minute! ) GET INTO STORES! ( look at your business from the eyes of the customer) Take risks! ( if you are sleeping well at night, you are too comfortable!) The produce business is about ITEMS, not categories. Stand for something in the eyes of the customer. ( M&S, Waitrose, and Aldi all stand for something. You must do so as well) Remember the adage. what got you here won t get you there!

21 This Case May Be Solved! Watson, the merchant isn t vanishing, it s evolving!! Understanding the nuances between a merchant and a marketer is not just a semantic exercise, it has very real business applications. Evolving your business to compliment what is evolving at retail is elementary!

22 Summing Up What we understand as the historic produce buyer has been evolving for many years now. Publically held, globally influenced companies, which buy the majority of produce, have redefined the criteria for achieving and holding a produce buyer job. ( I would not even get interviewed!!) Public affairs and social issues can have a negative impact on stock price. And when the stock is getting hammered, buyers feel the heat. This is neither a good thing or a bad thing and needs to be viewed objectively.

23 Thank You Bruce Peterson Peterson Insights, Inc.