Retailer Musical Chairs – What Does It Mean For Suppliers?

Calvin McDonald’s move from Loblaw to Sears this week may be the start of the butterfly effect that sees a wholesale shakeup of the management of Canada’s biggest retailers.

The pending changes will happen at all levels, especially with the entry of Target to the Canadian market; who we expect will bring a healthy contingent to Canada from Minneapolis but will need to build a total Canadian organization from the ground up. This will put an enormous change dynamic in play over the next 12-18 months.

Of course, every position that Target Canada fills with a seasoned Canadian retail manager will create a hole in the organization that they leave and this will force decisions about whether the replacement will come from the inner ranks or from another Canadian retailer.

If they choose someone from the outside the cycle begins again at the next retailer. The chain reaction could last a very long time and corporate recruiters are about to see a payday that has been unseen in sometime.

But what do all these moves mean for CPG suppliers?

For many it will be simply business as usual. For others, as the top retailing talent in the country leaps from one retailer to the next the inherent know-how and collective history of “supplier relations” moves with them. This can open up dangerous (and often costly) situations.

Much of the Canadian industry learned their lesson with the merger of Loblaw / Provigo and have aligned trading terms to be much more consistent and driven from clear counterparts.

However, those who continue to have inconsistent trading terms, regional deals and preferred vendor agreements will like be called to the carpet as the new employees look to make a mark with their new employer.

The costs can be high when simple excel spreadsheet comparisons are done.

I was recently speaking with a client in Europe who was very concerned about international retailers such as Carrefour who were comparing net prices across European markets. After comparing prices and trade terms item-by-item they were demanding the lowest net price on a particular product for all of the countries where it operates, regardless of local market conditions. The potential downside to the suppliers is being measured in the tens of millions.

In another case, when one large international retailer recently purchased a local Chinese retailer, they sent retroactive debits to many suppliers who had more favorable trading terms with the local (read smaller) retailer and the amounts were also in the millions.

Do you have a million dollar “surprise” waiting to happen in your business? Where are your “unexplainable” trading terms?

The time to do the math is now.

To paraphrase the Mastercard commercial says “Fully Transparent Trade Terms. Priceless.”


Leave a Reply

Your email address will not be published. Required fields are marked *