FMCG suppliers supporting select retailers over others could harm the convenience channel as a whole, writes Darren Park.
Suppliers providing retailers with new product (NPD) exclusivity is not new, and after a period of what I would call rational behaviour, we are witnessing this tactic reappearing in our Australian convenience channel.
Let’s explain how this works:
The availability of exclusive products or NPD to shoppers in a specific convenience retailer builds sales and consideration for that retailer relative to their convenience retail competitors. These exclusive products can provide an extra level of delight (and build a shopping habit) for that retailer and critically this is the key point, those shoppers can visit multiple times per week.
The AACS 2021 State of the Industry Report states the average c-store visitation is 2.5 times per week. So, an exclusive product launched in a retailer for 12 weeks, gets 30 visits of habit building opportunity well before any other retailer. And many suppliers seem to find that bizarrely irresistible.
At a recent NACS Conference in Europe, Jesper Østergaard, CEO, 7-Eleven Denmark, said we are now synonymous with new and innovative food products: “If you want to try something new, that’s (7-Eleven) where you go.”
Controversially I don’t hold retailers to blame, their strategies are in the main well known. I hold short sighted leadership in FMCG suppliers accountable, and here’s why.
As a supplier you partner with a retailer who has a circa 30 per cent dollar share of the measured Australian convenience channel – with sites concentrated in metropolitan areas.
You bring a high quality and innovative product to market, which will have broad on-the-go appeal. You build a commercial investment plan, which projects two key phases of your launch;
- A 12-week exclusivity phase with this retailer
- A second phase where you’ll launch across the balance of the convenience trade.
So, what happens to your investment plan and channel P&L (after the exclusivity phase with the retailer ends) if a large proportion of the convenience retailers (the remaining circa 70 per cent of share by measured value) decide not to range your (now 12-week-old) NPD? Will the NPD launch retailer volume and margin be enough to sustain your desire for a return on investment, not to mention broad shopper trial, acceptance, and repurchase? I don’t think so and it’s time to find this out once and for all.
If as a supplier, there’s a wish to overtly favour one industry player with category innovation over others, surely you lose the right to preach category management to the balance of the industry?
Second and speaking from a UCB perspective, we will refuse point blank to take NPD that has been gifted to other retailers in an exclusive manner, and I hope that other retailers consider their actions in this manner as well.
The convenience channel in Australia is profitable for suppliers, we have an environment where retailers actively support NPD and where in-store creativity, and shopper experience is rewarded.
All retailers aspire to win-win partnerships, we want them and so do suppliers. Supporting select retailers over others, aiding and abetting the artificial creation of shopper habits via NPD exclusivity at the expense of other retailers, could in fact harm our industry as a whole.
This opinion piece was written by Darren Park, CEO, United Convenience Buyers, for the August/September issue of C&I Retailing Magazine.