Global retail insights

By Brian Moore, International Retail Consultant

The Independent convenience retailer as a 'living billboard' for the Brand

There is a strong case for suppliers to think about moving the independent convenience retailer from a sales to a marketing function at point-of-sale.

Australia has seen higher levels of dependency on the major chains. Given Australia's already high level of trade concentration, this heralds more problems for suppliers, brands and independent convenience retailers.

Apart from their tendency to cherry-pick within categories, the major chains rarely offer a full selection of the suppliers' range and provide customers with minimal service in the store aisle.

For suppliers, the marketing landscape represents a zero-sum game. This means that the additional trade support required by the major grocery and convenience chains means even fewer supplier resources being available for maintenance and development of the independent convenience trade.To add to the problem, the revenue stream from a good independent convenience retailer often cannot cover the costs of regular sales calls.

All this means that the independent trade will continue to grow weaker – and the manufacturers more dependent on the majors - unless Australian suppliers take a radically different approach to investment in the independent convenience channel.

Historically, suppliers have regarded the independent convenience trade as a sales function. They need to at least break even on the cost of visit compared with size of the order so that the cost of calling can be justified. This approach has limited the number of direct-call accounts that are economically viable, resulting in increases in trade concentration - and power.

Educational role of specialist retailer

In many categories such as toys, books, houseware and home entertainment, the independent specialist retailer can fulfill an important 'educational' role on behalf of the supplier. Here the retailer helps to bring the consumers closer to the brand, allowing them to interact and bond with the product. They also benefit from advice and shop staff expertise.

In the case of convenience retailing, this degree of shopper involvement may not be realistic.

However, properly supported by the supplier, the Australian convenience retailer can be a source of a brand's' full range, and an advertising platform for the brand, in a way not possible via the major retailers.

Properly supported in this way, with appropriate training and point of sale material, the independent retail outlet can also function as a 'living billboard' for the brand, communicating with the consumer.

Unfortunately, given the economics of running an independent convenience store, it is not easy for the independent retailer to match competitor's prices. This inevitably results in their shoppers taking the experience of the brand, and buying the product elsewhere. Better retail training at point of sale can help to reduce some of this loss of trade.

Move from sales role to marketing role

If the supplier shifts his perception of the role of the independent convenience retailer from that of a sales function to a marketing function, then it becomes easier for the supplier to classify at least some of the cost of independent calling as ' consumer advertising'. And it indeed makes sense to see the independent outlet as an interactive consumer advertising medium.

In fact, given the increasing fragmentation of traditional above-the-line media, it could be said that a well-motivated and supported convenience retailer could have more brand impact on the consumer than traditional media.

With this change in stance, it becomes easier to justify the allocation of say 50% of the cost of independent coverage to the brand's consumer advertising budget. With this increased level of investment in a neglected channel, it becomes easier for pro-active suppliers to insist upon full compliance at point-of-sale in exchange for the help and advice they provide to the independent retailer.

If the convenience retailer is given the role of brand ambassador and is given regular focused help, it becomes essential that the independent salesman be trained to be a mini-CEO of the territory, in the way that a Key Account Manager is regarded as a CEO of the major account or a Brand Manager is regarded as a CEO of the brand. In fact they all become business managers of business units, with responsibility for sales and profitability.

Salesforce skill-set

The supplier's sales force will need skills in identifying a retailer's potential in fulfilling the brand ambassador role, and have sufficient retail business consultancy and management skills to help retailers to improve. They should also be able to train shop staff in optimising every contact with the shopper, on behalf of the brand.

This training of shop staff should also include skill development in selling and sales-promotion in order to ensure that sales lost to other retailers are kept to a minimum. For the supplier there can be an additional gain though the increased skills developed in its own field force.

Longer term, this focused drive to improve the impact of the independent convenience retailer will not only dilute some of the major chains' influence in the Australian market, but in the long term will also help to ensure maximum choice and value for the consumer. The ultimate benefit however, will be in building and maintaining brand equity via the 'living billboard'.

Allowing the market to evolve 'naturally' could possibly result in the opposite....

Optimising the output

How to move the independent convenience retailer from a sales to a marketing function at point-of-sale?

First, it is essential that marketing and sales really assess how the consumer interacts with the brand at point-of-sale, ideally by direct observation in a sample of convenience outlets. In other words, sales and marketing should conduct joint store visits both to observe consumer-shopper behaviour and also to interact with shop staff. Establishing a dialogue with the owner and staff members will help in interpreting usage and attitude of shoppers at various stages of the usage lifecycle.

Bearing in mind that convenience shop owners not only have a desire to remain independent but usually have a deep and absorbing interest in retailing, they can be a vital source of fundamental insight on both the category and the company's brand.

Sales & marketing involvement

Direct contact with marketing, tempered by the presence of sales, can help shop-owner and staff to focus their efforts in converting shopper-interest into a sale, in the aisle.

This degree of contact between shop and shopper helps marketing to define how in-store promotional and educational material can best be aligned with national consumer advertising. It may even happen that this closer contact with consumer-usage in a specialist shop environment may cause marketing to refine their Australian consumer advertising approach.

In the case of the specialist sales force which has to engineer and manage this closer interaction between brand and consumer, it is important that they develop retail business consultancy and sales-training skills to improve shop-staff conversion rates in dealing with shoppers.

Salesforce as business consultants

In terms of business consultancy, it can be useful to remember that all retailers are narrow, in-depth specialists in their own shops and their business environment. Apart from the fact that retailers can have up to 400 categories in store, preventing anything other than superficial analysis of each, they are not permitted to establish direct comparisons by visiting competing stores. Thus their view and business experience is narrow, but can be very deep.

On the other hand, a salesman is of necessity a specialist in the category, and quickly develops experience of all methods of retailing that category, either by direct contact with other retail environments, or indirectly via colleagues and the overall experience of the company and brand. Because of the degree of spread of knowledge and insight, the salesman's experience of category retailing is of necessity relatively shallow, but very broad.

It is this combination of salesman's breadth and shopkeeper's depth that makes for a very powerful combination that can add real value. The salesman operating in this way can quickly assess the retailer's capabilities as a retailer, compare it with a more advanced example of Australian retailing - and use the category to optimise output.

If we accept that this retail business consulting approach can add demonstrable value at the supplier-retailer interface, then it is important that the company rep develop and use skills in analysis and decision making, numeracy and financial understanding, strategic thinking, focusing upon results, relationship management, creativity and innovation.

In fact, the precise skills of a state-of-art Key Account Manager,

Brian Moore bmoore@namnews.com