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Why Collaboration Is Important for Both Brands and Retailers

Why Collaboration Is Important for Both Brands and Retailers

Today’s shoppers have gained more control over their purchase power due mostly to technology. And as they gain more insight into the products and services they’re offered, more brands are shifting their focus from a retailer-first approach to a shopper-centric strategy. As a result, the need for collaboration between brands and retailers is stronger now than ever in order to meet the real-time demand of shoppers.

Some organizations have already made improvements by sharing information and developing joint strategies between manufacturers, suppliers, and retailers. Meanwhile, others are struggling to collaborate effectively, likely due to their failure to adapt to the modern-day shopper’s needs.

Why Is Collaboration Necessary?

Today’s shoppers demand a retail shopping experience that’s fast, simple, flexible and meets their needs. They expect real-time inventory (44% of smartphone users value the ability to check inventory in a retailer’s mobile app), or the option to shop online and pick up an item in a store. Others may expect items to be delivered on a day and time that’s most convenient for them.

These shifts in shopper expectations have required brands and retailers to find ways to connect seamlessly to improve the overall shopping experience – both in-store and online. In fact, Accenture’s research indicates successful collaborators can generate 2-10% in operating margin improvements, as well as reduce costs for both groups – cutting logistics cost by 3-4% for retailers and manufacturing cost by 5-15% for brands. What’s more, a recent McKinsey & Company study found that winning CPG brands are 2.6 times more likely to dedicate resources exclusively to improve in this area.

It’s also important to note that successful collaboration can optimize inventory management; it can raise store-shelf stock by 5-8%. This is essential for brick-and-mortar stores, as shoppers seeking a specific product are more likely to go to another store than choose another product. However, such behavior is unique to physical stores. Online shoppers are more likely to pick a different product rather than go to another site when an item is out of stock – a behavior researchers have dubbed the “Amazon Effect.” Despite this, out-of-stocks for online purchases are said to cost retailers $17 billion dollars per year across all industries.

As this shows, collaboration not only improves key business operations – like risk management, and inventory management – but it’s also a key factor in brand growth and retail sales.

Establishing Good Collaborations

The process of establishing a good collaborative effort should start early in the relationship. At this point, suppliers and retailers should develop a well-defined joint business strategy, and it needs to be complete with key performance indicators, such as:

  • Gross margin
  • Total sales
  • Inventory
  • Shopper-focused insights
  • Promotional analytics
  • Offer redemptions

It’s important to make sure that both parties see the effort as a true partnership. This will help them work together instead of having one attempt to delegate everything to the other.

The partnership between Best Buy and Toshiba is an excellent example of collaboration done right. The brand and retailer combined their shopper insights to create the first child-centric laptop, the Satellite L635 Kids’ PC. Thanks to their shared data, they discovered that a laptop with unique features – such as a fingerprint resistant screen, a wipeable keyboard, and a secure, kid-friendly Internet browser – would appeal to their target audience.

Micro-Scale Collaboration

There are certain times when brands and retailers can improve results through small collaborative efforts. One way to do this is by creating a faster shopper experience. This includes shared inventory data and market insights. Some companies are even using robotic inventory management to speed things up.

This is especially important for CPG brands like Mars Wrigley Confectionery, which sells gum, candy bars and other products typically found near the checkout aisle. The brand relies heavily on impulse buys, and they must work closely with their partners to get the necessary insights to understand shopper needs.

More brands are also realizing that they must work together to ensure shoppers can access product information when they need it. According to Retail Dive, nearly 60% of shoppers look up product details and prices while using their mobile phones in stores. Sharing data is only a simple way for both groups to work together to increase loyalty and improve their relationships with shoppers.

Macro-Scale Collaboration

Many initiatives call for deeper partnerships in order to achieve better results. For example, Johnson & Johnson, the maker of personal and baby care products, recently redesigned the packaging of its Johnson’s Baby products. Before the transformation, the brand had 102 different types of bottles and closures, 293 formulas, and 470 different products, according to Packaging World. This impacted their business structure and supply chains – preventing the brand from adapting to their target market, millennial parents.

The transformation required collaboration between the company, its suppliers, and its shoppers. As a result, the brand was able to:

  • Streamline operations
  • Simplify the supply chain
  • Pare back ingredients lists
  • Create new formulations based on cutting-edge science and parent preferences

Through their shared efforts, Johnson’s Baby saw a 70% reduction in the number of bottle and closure styles, helping them to better meet their target shoppers’ needs.

Both on the micro and macro level, collaboration helps brands and retailers streamline operations, optimize inventory management, increase sales, and better meet shopper expectations. Those who are successful in this area can gain a competitive advantage over companies that continue to work in silos. To achieve success, find impactful ways to increase brand-retail collaboration to enhance the shopper experience, and in turn, see continued growth.