In light of last week’s findings from the Grocery Market Watchdog that Tesco deliberately delayed payments to suppliers in order to boost profits, it’s clear that negotiating with the supermarkets continues to be a challenging and demanding business for suppliers.
Dave Lewis, the Tesco CEO, has apologised and repeated his commitment to rebuilding supplier relationships after years of negotiating tactics. But in the midst of this lack of transparency and trust, what should suppliers do when it comes to negotiating with the supermarkets going forward?
Based on my years of experience negotiating with the supermarket big 4 as an FMCG Account Manager, here are my 3 steps to successful supplier negotiations:
1. Balance the playing field
With the supermarkets’ greater focus on price and a move towards a leaner supply chain, it’s more important than ever to hold your nerve before, during and after negotiations. The big supermarkets will be putting huge pressure on you to drop your prices as this is a way for them to claw back their profitability. Whenever I was negotiating with one of the supermarkets, I used to reverse the roles in my head and tell myself that they need to convince me why I should invest in their routes to our customers. By remembering that the supermarkets need your products and your investment, you will balance the playing field in your mind which will help you feel more confident during the negotiations.
2. Keep the dialogue open
Communication is key, so keep the dialogue flowing. Listen and be empathetic to the supermarket’s particular challenges but that doesn’t mean you have to pay for their problems. For example, when I was faced with intimidation tactics, I tried to remember that the buyers were only doing what they had been told to do and long term we would need to continue to do business together. Given the current retail environment, it’s far better for both parties to work together to find new ways to improve shopper experience. After all, as Sam Walton said, “ There is only one boss. The customer. And he can fire everybody in the company from the chairman on down simply by spending his money somewhere else.”
3. Stand your ground
Drawing on your resilience is essential during any negotiations but particularly when you are negotiating with one of the big 4 supermarkets. I remember only too well how difficult this could be – I once asked for advice from a more seasoned account manager who told me not to take things to heart. So my final piece of advice is don’t take things personally and try not to buckle under pressure – whether it’s the pressure from the supermarket or from your own colleagues. Instead remember to stand your ground and be confident about your decisions.
Whether you work in FMCG, Retail, Banking or Technology, by following these three steps you will be well on your way to mastering the art of supplier negotiations. Good luck and happy negotiating!