It’s not all about the money for global suppliers
Food and grocery suppliers are not out for a fast buck when entering into a global trading relationship with an international retailer, research from international food and grocery think-tank IGD has suggested.
Nearly three quarters (72 percent – up from 54 percent last year) of suppliers surveyed said they are happy to have relationships on a world-wide scale despite the majority (55 percent) of them not perceiving any direct financial benefit.
“There are many softer benefits to global account management that will have a much bigger impact in the longer term,” said Joanne Denney-Finch, Chief Executive of IGD. “Our research has shown a huge shift in attitudes over the last three years with suppliers becoming much more open to trading globally with the multi-nationals.
“With less than half of them reporting financial benefits, but still saying that they are feeling very positive about the relationship, it is clear that it’s not just about the money. There are benefits that will be played out in the future as both retailer and supplier reap the rewards of closer business planning, sharing best practice, and more efficient negotiations.”
Global or regional pricing is included much more often in negotiations, as retailers find it easier to compare prices across different markets and countries due to increasing price transparency. The IGD survey showed 41 percent of suppliers are including global or regional pricing in their negotiations, compared to 13 percent in 2004.
Despite possible pressures to cut prices in line with those in other countries, 72 percent of suppliers are happy to have global trading relationships with retailers like Wal-Mart and Tesco. This is up from 21 percent in 2003 and 54 percent in 2004.
As price competition intensifies, especially in Europe, international retail analysts at IGD anticipate that there will be an increasing focus on negotiating trading terms as part of a global relationship. Key factors influencing price transparency include developments in Information Technology (IT), consolidation of Central and Eastern European markets through mergers and acquisitions, and expansion of the Euro-zone.
The survey was conducted by IGD during September 2005 as part of the research for a report on Global Trading Relationships, due at the end of October.
“It should not surprise anybody that retailers are focusing more on price as they develop their global relationships with suppliers,” continued Joanne Denney-Finch. “The real benefits to both supplier and retailer come in the longer term. Efficient negotiations, joint business planning, sharing best practice and building better customer relationships are not benefits that reap an immediate financial reward for the supplier. But they are the factors that suppliers are highlighting first. And they are the building blocks of more sustainable long term partnerships that lead to financial gain in the future.”
