Selling the Big Box Retailers In Today’s Economy
Selling to North American big box retailers comes down to one word, PRICE! Cost of goods price, retail price, etc. – whatever the case is, it will continue to be price that dives sourcing and price that drives retail sales value to consumers for many years to come!
Since the financial debacle (or “correction” depending on who you ask), retailers and suppliers have been scrambling to identify new consumer trends to stay in front of the competition, retain customers, and most importantly, capture market share. Capturing market share has recently taken a back seat to most retailers, as they are concerned with promoting the “value” image to consumers. To that end, they are striving to provide lower retail prices across the board, in all product categories. In doing so, they are giving up significant margins and profit dollars on key merchandise (and have been since 2008).
How does this impact a Global Manufacturer in a North America Retail Market?
Price pressure from the consumer is passed along to the retailers, which the retailers pass along to the suppliers. This has sparked a line review frenzy unlike any I have ever seen. Retailers are putting pressure on the best and the worst of suppliers to lower costs and share in the margin losses game. The problem for global manufacturers is that the manufacturing community is being hit, at the same time, with raw material and labor cost increases, currency fluctuations, and a declining US dollar. Given those factors, it is difficult for even the most valuable long term suppliers to avoid being seriously squeezed.
Retailers are firm about lowering costs and their cost out initiatives will prevail. So if you’re a newcomer to the supply side of retailing and are invited to a line review with a big box retailer, be prepared to sell your goods at minimal margins. As much as you may be able to provide “value added products” to the retailer, this economic market is making them consumed with one thing… Price. Retailers will give suppliers the standard story line for suppliers among which is that suppliers must look at volume as something that just keeps your machines running and cover your overhead so you must look elsewhere to find more profitable customers.
Chinese-made products continue to dominate North American Retail Shelves… for now…
China continues to dominate the supply side of goods sold in most retailer stores in North America. That said, countries like India and Vietnam are threatening China’s position and quickly developing infrastructure to compete with China as alternative low-labor-cost manufacturers of goods. North American retail global sourcing offices are reaching out to these underdeveloped nations, making contact with potential suppliers and putting in the framework for future supply opportunities. Currency valuations are still paying a major role in the global flow of goods from continent to continent and the US has taken the lead to level the playing field with counties like China (who are deliberately devaluing and suppressing their currency (RNB) to capture world trade) by passing recent legislation to apply tariffs to goods coming in from those counties practicing unfair trade through currency manipulation. Although many believe this will create a trade war, many also are of the opinion that we are already in a trade war and that this is just one of many battles yet to come. Many counties are feeling the pain as their economies have been devastated by these trade policies and they are looking to the US to bring back some balance in world trade.
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Andrew Gaeta is the president and founder of The International Trade Group, a full service, end-to-end sales and marketing firm that provides global manufacturers with a step by step process designed to bring their products to the North America Retail Markets. itg offers global manufacturers logistical, tactical, and sales marketing expertise in retail consumer package goods and commercial professional classes of trade. itg guides manufacturers the total selling process to ensure your products reach the shelves of all types of North America retailers and the shopping carts of their customers. Andy can be reached at 410-741-1644 or at firstname.lastname@example.org.