'Compliance' is not a dirty word

Article supplied by ACAPMA

What do you think when you hear the term 'retail compliance'? If the likes of 'low standards', 'poor follow through' and 'lack of accountability' come to mind, then you are not alone.

You may be surprised, though, to discover that FMCG suppliers are just as disillusioned as petrol convenience operators. Is the situation really this bad? ACAPMA surveyed several of its members – retailers, buying groups and FMCG suppliers – to gain a better understanding of the situation and to look for some solutions. The survey questions were:

1 What does 'retail compliance' mean to you?

2 Describe the roadblocks to compliance that you have experienced?

3 What actions could different groups take to improve compliance?

4 Give an example of successful compliance.

What is retail compliance?

One traditional view of retail compliance has suppliers dominating the process and retailers feeling 'bullied' into participating in promotion, whether they like it or not. On the other hand, store operators that just pocket the margin, but do not actively support the promotion dismay suppliers. Then there are those retailers that just ignore agreed stock weight, merchandising, price and use of support material, leaving suppliers preferring not to deal with them at all.

New Sunrise Group Director, Steve Cardinale, calls this attitude to retail compliance the 'you will' doctrine. "This approach was built around a corporate retail mentality that had little flexibility and limited entrepreneurial drive," he said.

As retailers, especially independents, have become larger and more sophisticated with some taking up the services of buying groups, their approach to compliance has changed. Today, retail compliance is more about long-term relationships, not one-off deals. Category management through a core range now requires several suppliers and retailers to agree set planograms.

Promotional activity is better organised, with much improved (and more costly) POS material provided to support in-store merchandising. The motive is the same – sales growth and profitability for both supplier and retailer. However, there is now more give-and-take rather than driving hard bargains.

"Retail compliance means more than ensuring retailers comply with a monthly promotional program," said Garth Anderson, General Manager, Matilda Fuel Supplies. "We see it as a whole retail strategy for ensuring sustainability in a very competitive market."

"Retail compliance means retailers sticking to what they agreed to … in return for the supplier supporting them with a promotional program and off-invoice discounts," explained Unilever's Kerry Ginsberg. As National Customer Manager – Streets Ice Cream & Lipton Ice Tea, Ms Ginsberg has been involved in many promotions, and is representative of modern suppliers that view retail compliance as a joint effort for mutual benefit.

"When retailers, together with the help of suppliers, run a successful promotion, everyone benefits from the sales growth that a well-run store can generate," she said. That's the ideal, but it takes effort to achieve this outcome, and that means tackling any roadblocks.

Roadblocks

Despite changing attitudes, members still experience problems with retail compliance relationships. The main roadblock identified in the survey was inconsistency – within an individual store and across networks.

"Employee consistency is a challenge," said Troy Bennett, General Manager with Bennetts Petroleum Supplies, a multi-site petrol convenience business. Suppliers understand that poor execution can sometimes be due to casual staff operating in unsupervised environments.

"Untrained staff or employees not briefed effectively on the details of promotions and compliance can undermine good work," added Unilever's Kerry Ginsberg.

Inconsistency is an issue for buying groups wanting to extend promotional activity to smaller regional stores.

"For some small country operators, the sheer number of promotions and the complexity of compliance requirements can be a challenge," said Evan Newell, Retail Marketing Manager, Tasco Inland. "Physical store space may be an issue, and some suppliers do not understand country markets."

Then again, some store operators are just plain stubborn. "There are individual retailers that believe they know better and simply work against what the buying group is trying to achieve," noted Brett Barclay, CEO of him! Australia. And, some suppliers are still living in the past.

"We have had very few problems with retail compliance," said Simon Egan, UCB Category Manager. "However, in the odd cases where problems arose, the roadblock was supplier support – either lack of merchandising assistance or pricing issues."

More likely is some level of miscommunication and misunderstanding between retailers and suppliers, with retailers not implementing agreed terms or taking up the correct product levels, or competing suppliers offering over-and-above incentives to entice retailers to go beyond the agreed planogram or share of space.

Doing better

Improved retail compliance will lead to higher profits for members; it is in everyone's interest to do it better. Suppliers can do better by taking a category approach and addressing the entire planogram, not just focusing on their own needs.

"Suppliers need to respect retailers and their needs," said Ms Ginsberg. "Be fair and don't overload them with POS material. Rather, make sure reps keep the POS up-to-date when visiting stores and ensure stock is available as needed."

Retailers can do better by being more actively involved in the promotion and more proactive in getting organized to participate.

"Ensure promotions are reviewed in time to place orders ready for when they begin, and display POS as soon as it arrives," said Nick Cozens, Operations Manager for Western Australian BP multisite operator AMBBT Pty Ltd.

"Take time to understand the mechanics behind each promotion, then work with suppliers to execute fully," said UCB's Simon Egan. "It's not only range and layout that are important, but training as well," added Evan Newell.

Buying groups can do better through effective communication with the group.

"Keep it clear and simple, because some retailers struggle with instructions," said Nick Cozens. Most important of all, hold buying group members accountable.

"I'd go as far as saying 'be ruthless' with those that do not comply," said Brett Barclay. "Consider removing noncompliant businesses from further promotions to get the message across that compliance in important. Of course, that means suppliers must have national coverage of both representation and supply to meet their obligations."

Steve Cardinale from New Sunrise proposes that a code of conduct – a signed document that highlights the key success factors for all participants – would lead to improvement in retail compliance across the industry.

This begs the question: What is successful retail compliance?

Steps for success

Successful retail compliance starts with communication.

This may include involving retailers, through their buying group, in the actual design of the promotion as part of category management. Either way, once the details are decided, it is critical that full details are communicated to retailers in sufficient time for them to get ready.

This includes staff training, reorganising store layout, and ordering stock. With such support, retailers should comply. Promotional POS needs to be delivered on time, and some stores may need assistance in setting up.

"The supplier representative and retailer should set up the off-location display together and ensure special tickets are used in all product locations from the beginning of the promotional selling period," said Simon Egan.

Good communication needs to continue after the promotion has ended, to measure and discuss results, and nurture the relationship for next time.

"Retail compliance is all about working together to drive sales and profit," concluded Evan Newell. "When the retailer, buying group, and supplier are all working together for a common goal, successful compliance takes care of itself."