Senior executives from 130 major consumer goods companies worldwide took part in our 2013 customer engagement survey, which tracks the state of trading relationships. In this video, Ian Walters discusses three of the major priorities identified by consumer goods manufacturers and retailers for the next three years, while the article below elaborates on the top six opportunities in our industry. 

In this, the ninth year of our annual survey, the economy is showing few signs of growth; retailer and supplier margins are under constant pressure, shoppers are becoming more ‘forensic’  to make the household budget go further and the trading relationships between retailers and suppliers are ever more complex.

That’s why it’s crucial to understand what is, and will continue to drive the agenda for both retailers and suppliers for the next few years.  The following six priorities are based on the findings of our survey and also signal which supplier capabilities retailers are looking for in their ideal trading partner.

1. NPD and innovation is back on the agenda

Suppliers and retailers haven’t always had the same priorities for new product development (NPD) and innovation. Over the past few years, suppliers have ranked new product introductions higher on their priority list than retailers, but this year both parties are better aligned.

This leads us to believe that there is a window of opportunity for suppliers to bring new products to the market – with one caveat; they must be truly innovative and add value to the category, giving it longevity.

Two in three retailers told us that they consider a best-in-class supplier to be able to add value to the category by focusing on genuine innovation.

Suppliers need to be flexible enough to react to retailer and shopper needs and use shopper insight effectively to deliver what shoppers want.

2. Multichannel capability – the new battleground

Our industry is changing fast thanks to changing shopper behaviour and emerging technology, but multichannel retailing isn’t just about online shopping.

Shoppers don’t recognise channels, they’re looking for availability and consistency however they shop; whether it’s via smartphone, tablet or PC or physically in store at their local supermarket or convenience store.

Retailers are beginning to recognise different shopping habits by channel. Almost half of retailers and a third of suppliers answering our survey told us that developing multichannel capability will become increasingly important within the next three years. For the international suppliers who took part, they expect this to be their number one priority in three years time.

3. Opportunities for further collaboration

Retailers scored finding opportunities for further collaboration with suppliers as the second highest priority in the survey. They are looking for suppliers with the right capabilities who can negotiate strategic long-term agreements.

While the delivery of the ‘joint business plan’ is an established requirement, retailers feel that it’s important to develop longer term relationships and stronger alignment with suppliers. This requires suppliers not only to understand the retailers’ strategies, but also the economic business model and the financial criteria which drive their decision making. By doing so, they will strike better, more mutually acceptable agreements in the long-term.

4. Quality account management skills play a crucial role

Today’s account manager has to operate in a highly complex environment, responsible for the management of all aspects of their company’s relationship with their customers. They play an integral role in the supplier-retailer relationship and their primary objective is to developing appropriate strategies for their customer and their shoppers.

Overall, suppliers believe they have developed good account management capabilities with the majority focusing on getting the basics right. However, when we asked retailers which qualities are required to be a best-in-class supplier, they told us that taking a more agile and strategic approach to customer management is key and this remains the challenge for most suppliers.

Retailers are actively looking for their suppliers’ commercial teams to make quick and effective decisions. Agility and flexibility are key, especially when there is an opportunity or a new retail initiative. It makes a real difference to which supplier gets the first telephone call.

One in five suppliers told us that their business hasn’t yet developed an effective customer segmentation strategy and one supplier in three said they are hampered by systems not being able to analyse trade spend and promotional effectiveness.

The correct skills and capabilities are vital when taking a more strategic approach to customer management and to maximise the return on trade investment for the business.

5. Understanding shoppers continues to rise up the agenda

Both retailers and suppliers agree that building capability in shopper insight is a major focus area for trading relationships.  They told us that long-term success is linked to a collaborative, shopper-centric strategy.

Despite suppliers making good progress in building their capability within this area it still remains polarised. Results from our survey show that, for suppliers, understanding the shopper will become a joint focus area, alongside price and promotional activity, three years into the future.

Two key messages emerged when retailers were asked what they thought suppliers should be doing to improve their shopper insight capability. Over three quarters of retailers told us that they are looking for suppliers to develop greater capability in turning shopper insight into action and over half are looking for suppliers to develop bespoke shopper programmes for each store format.

6. Supply Chain – there’s still more to do

Supply chain efficiency still very important for retailers. Responding to the changing needs of the retailer and meeting their requirements in full, distinguishes best-in-class suppliers from their peers.

In last year’s survey, we detected that supplier functions were not as joined up as they could have been and we still believe that it’s true for many companies. There has to be one customer goal for all functions across a business and currently less that 1 in 5 suppliers rate themselves as best-in-class within this area.

What does this mean for you?

As with previous years, our survey has highlighted trading relationship priorities for retailers and suppliers. It’s clear that those suppliers who have invested in developing their overall commercial capability are doing well and will continue to succeed. It’s not just about large companies either; smaller suppliers want to emulate their success and develop stronger relationships with retailers. They want to know what’s not only working well and which areas of the relationship need to be strengthened.

Ian Walters

Commercial Development Manager

IGD