In one of my last articles, I wrote about how to discover problems of the retail chain and learn about its needs. I wrote about why identifying needs is so important and how to learn about problems of the retail chain as well as its challenges. Today I would like to invite you for continuation which focues more on the buyer as a person rather than a company.
The needs of the buyer and the needs of the retail chain. Are they the same?
If you would like to learn more about how to research the needs of the retail chain I invite you to read my article.
Today I would like to offer you a continuation of this article. However, this time we will focus directly on the buyer. What is the difference? In theory, the needs of the retail chain and the buyer should be the same. However, at the end of the day, it is the buyer who personally decides whether he will buy, how much he will buy and from whom he will buy. The needs of the retail chain he works for naturally become his needs as well.
Problems of the retail chain
However, the needs of a retail chain, which each retailer communicates in its marketing materials or on its websites, often have a rather high level of generality, or even loftiness. The role of the merchant is to transform these lofty slogans into concrete actions on its category. This work creates many additional needs, challenges and problems along the way, which every supplier should be familiar with or at least aware of.
That’s why, in this article, we’ll focus not on what retail chains in Poland. We’ll talk about what specifically the buyer faces when he comes to work on Monday, and why this knowledge is so important if you want to sell him your fruits and vegetables.
Differences by example
To illustrate the difference, let me give an example. A large retail chain announces that from the next season it will buy only Polish apples. Based on this information any supplier of Polish apples will be like: „Great, now I simply need to send an offer with Polish apples and I wil make a deal and sign a contract with retailer for sure!.” What does this look like from the buyer’s point of view?
The overall goal and need remains consistent with the company’s policy – the buyer is to buy only Polish apples. However, this is followed by a number of other problems, such as:
- How to terminate the existing cooperation with suppliers of imported apples so as to preserve the correct commercial relationship? (Who knows, maybe in a year’s time the situation will reverse and the buyer will have to call them with a request to buy because there will be a shortage of apples in Poland)?
- How will the removal of imported apples affect sales performance, margin, liquidation on the category?
- What to introduce instead of imported apples to maintain assortment diversity and sales performance? New varieties, new ways of packaging? Are there any Polish varieties that will successfully replace foreign ones? How about introducing waxed apples that will look similar, although taste completely different?
Overview of the problem
The above example clearly shows that after the announcement of the end of the sale of imported apples by the retail chain, the buyer does not care at all about further offers of Polish apples. A number of practical problems arise in his daily work, and it is their solution that can guarantee a potential supplier’s success.
While you can read about the general plans and intentions of the retail chain in the advertising materials of the retail chain , you can read about the practical problems in the work of the buyer only on this blog 🙂
What are the targets of Polish fruit and vegetable buyers in retail chains?
First of all, the merchant is held accountable for a number of quantifiable KPIs. In practice, the result on the managed category in the current year is compared with the result in previous years. We compare different periods: day, week, month. The choice of the comparison period depends on what we are currently analyzing. If we want to see how the current promotion is going then we focus on daily sales. If, on the other hand, we are analyzing the course of an entire campaign (this is sometimes how the sales period of a fruit from a given country of origin is defined) – then we glance at weekly or even monthly results.
KPIs create a network of interconnections
What indicators does a buyer most often have to explain to his boss? The buyer should aim to improve on metrics such as sales volume (quantity sold), sales value, margin, liquidations, market share, service level or rejection rate. These indicators are strongly interrelated.
For example, if we manage to reduce the rejection rate then our service level automatically increases. A good service level ensures full availability and, as a result, an increase in sales volume. If a buyer decides to organize a promotion for a product, then automatically volume or value sales increase (the former almost always, the latter not necessarily – I will talk about it in other posts 🙂 ) but the margin decreases. Each buyer, by choosing the right category management tactics, has the opportunity to model his KPIs according to his goals.
In theory it seems simple – a buyer in a leather swivel chair in a metropolitan skyscraper arranges assortment and promotional plans like a conductor ensuring the targets achieved or preferably exceeded. In practice, one major variable comes into play on the fruit and vegetable category – the weather 🙂 . And this causes very large fluctuations in supply and prices, which sometimes makes beating last year’s results a breakneck task.
Key indicator
At the end of the day, the ultimate verification of a buyer’s work is market share. This is because it tells whether a buyer is doing worse, better or the same as the market. This is an especially important indicator in the recent period of rampant inflation. Bragging about double-digit increases says little when prices are rising by that much. If sales are rising everywhere, market shares will tell us if we are growing as fast as the market or if we are growing more slowly – in other words losing.
Market shares can effectively verify unjustified optimism resulting from high sales increases – as it may turn out that all our competitors are selling even more and growing even faster. On the other hand, market shares can be a helping hand for a buyer who is just being „grilled” by his bosses for falling sales. For it may turn out that sales are declining across the market and we are losing relatively less than the others, so that our share of the shrinking pie grows.
Descriptive goals
In addition to quantifiable goals, less quantifiable goals are often set before the buyer, such as participation of direct producers in supply, diversity of the offer, price competitiveness, diversity of the supplier base, extending the season with new countries of origin, introduction of new products, etc. These are tasks that translate into numbers, but in the long term and not in a direct way. If, for example, a merchant increases the share of direct producers in supply by 50%, it can be assumed that this will result in a decrease in the rejection rate due to better quality control, customers will appreciate the flavors of the products supplied more, and sales will increase as a result. Improvement in margins may also be expected due to the removal of the middleman. However, this is certainly not an automatic effect, such as an increase in sales due to promotions.
Merchant, plasterer, acrobat….
In conclusion, it must be said that the buyer’s job is a piece of cake. The buyer has to sell more than last year, for more money, on a better margin, having lower liquidations, growing on market share and all this still with a diverse, competitively priced offer with a diverse base of reliable suppliers – preferably direct producers. Simple, isn’t it 🙂 ?
Why is it so important? If you plan to send an offer to a fruit and vegetable buyer, you should present the benefits of working with your company, referring to the buyer’s goals. While looking at many trade offers, I read a lot about newly purchased trucks, modern cooling systems and built warehouses.
But in essence, the buyer doesn’t care. It is worth mentioning all this, but it is necessary to emphasize the benefit coming from those assets:
- Cooling system = reduced rejection rate at the end of the season;
- New trucks = on-time delivery, high service level;
- Warehouse = ability to store deliver more goods, which will ensure an increase in the volume sold.
Are you a grower, cooperative or trade company? Are you thinking about entering Polish retail market? Would you like to learn more about the supply of fruit and vegetables to Polish retail chains? Let’s get in touch!