The vendor-retailer relationship is complicated, time-consuming, and sometimes frustrating. But if it’s the right relationship, it can be mutually beneficial and everyone is happy—or at least minimally dissatisfied, depending on your perspective.
Vendor vs. Solution Provider
It’s intriguing when a whole group of people starts calling themselves by a different name. Why did the vendor community start to rebrand itself as “solution providers”? According to some retailers, a rebranding effort was needed due to a large percentage of the community giving “vendor” a bad name from over-promising and under-delivering, misleading them through the vendor-retailer relationship process, or nickel-and-diming them through the contract.
This rebranding initiative was an interesting topic to explore and after multiple interviews with “solution providers,” it was clear that both vendors and retailers have a story to tell when it comes to buying process etiquette and the vendor-retailer relationship. Although it is well understood that the industry distinction of “solution providers” is they supposedly bring a complete solution to the selling table while “vendors” are selling a stand-alone product, the industry group as a whole will be referred to as “vendors” throughout this article–no offense intended.
This article will examine the top three pitfalls of the vendor-retailer relationship from both perspectives. After more than 25 separate interviews, it was interesting that all the pitfalls discussed from both retailers and vendors seem to fit into three broad categories:
- Making assumptions,
- Inconsistencies in the process, and
- Misleading information.
Each one will be discussed from both perspectives to hopefully shed some light on the main frustrations of this complicated, tedious, and apparently sensitive process.
Vendors and retailers define the ideal vendor-retailer relationship in fundamentally the same way. But it was interesting that no matter what the product or service and no matter the retail category, the gripes and suggestions for improvement fell into a few main pitfall categories.
When conducting some academic research on the subject, I was surprised by how difficult it was to find a current philosophy or methodology discussing the vendor-retailer relationship after the sale. There were certainly many books on the steps leading up to the sale, such as Getting to Yes!, Cha-Ching!, and Selling 101: What Every Successful Sales Person Needs to Know.
In Stephen Guth’s book, The Vendor Management Office, the author explains the benefits of having an in-house organization that solely deals with vendors. He also offers several definitions that are helpful in outlining the typical best practices for dealings between vendors and retailers.
Guth offers a list of attributes exhibited by vendor organizations that focus on operational excellence with clients:
- Caring culture to address the human needs of the customer and a high degree of customer intimacy.
- Engaged and trained employees that are held accountable (through metrics) to produce results.
- Disdain of bureaucracy combined with organizational agility to cut through red tape.
- Strong focus on process rigor and introduction of best practices.
- Constant self-evaluation, including through formalized customer feedback, and corresponding organizational evolution in order to consistently deliver more value.
- Improvements in speed of service and reductions in cost through automation and process improvement.
When it comes to best practices, within the retail community there are definite differences among what are the most important variables to create a valuable vendor-retailer relationship.
“My view of a good vendor is one that knows our business intimately and proactively comes up with solutions that save us money or increase our ability to serve our customers,” said Jeff Levitt, senior manager of asset protection for Panera Bread. According to Levitt, “retailers should look at a few key elements before signing on with a vendor:
- “Length of time in the industry. You don’t want to sign a contract with a company that will be closing their doors in a year or two.
- “Relationships with strategic partners. Especially with technology, it helps to have numerous strategic relationships within the industry when the focus is a complete solution, not just a product.
- “Service. No matter how big the vendor, it’s always nice to have immediate and ongoing attention to your business needs.”
Other retailers agree. “The most valuable vendors are those that have the best interests of [your company] at heart,” said Shaun Slaughter, former director of retail store operations for Vera Bradley. “When retailers find a partner that really understands our business and makes us a priority, that creates a real, lasting business relationship.”
Some retailers have a simple and straightforward view of how the vendor-retailer interaction should be conducted.
“Be genuine,” said Paul Pillsbury, former director of loss prevention at Big 5 Sporting Goods. “I don’t appreciate an over-the-top sales-type approach. I look for three main things among others when researching a vendor—service, features, and then price. Of course, the price must be reasonable, but it’s only a small part of the equation. There has to be a valuable balance of all three.”
Looking at the positive, best practices of complex vendor-retailer relationships is helpful. However, candidly examining the pitfalls as seen through the eyes of both vendors and retailers is potentially a new way to reach a valuable level of understanding.
Pitfall 1: Making Assumptions
Throughout the research and interviews, one pitfall that brings the vendor-retailer relationship to its knees is when either side makes assumptions. Incorrect assumptions can be made about everything from the actual buying process and internal communication to why sales people are calling and the evolution of salesperson-turned-account-manager relationships. But the most passionately debated are the assumptions made about expectations.
From the vendor perspective, Robert Walters, senior vice president of sales and marketing for The Retail Equation said, “It’s vital to properly identify what the objectives are before you enter a relationship. Unrealistic expectations can come from both the solution provider or retailer side. When both parties work together to set realistic goals and objectives for a project, it significantly increases the chances of success.”
Retailers expect the vendor’s staff to be well-educated on the details of the product–all staff, that is, including salespeople.
“A lot of salespeople out there don’t know the intricacies of their own products and will sell the retailer anything they want to buy,” said Ed Wolfe, vie president of business development at WG Security Products. Wolfe also has an extensive career in retail loss prevention in varying categories. “That’s not the best way to forge a long-lasting, mutually beneficial relationship. Retailers must have trust in their salesperson to provide the best product, and they must explain what problems it will solve for the retailer in their language. The only good business is long-term business. For solution providers to truly help retailers, they have to know what challenges the retailer faces on a daily basis.”
Retailers are also frustrated when vendors make assumptions not based on experience in the stores or training from that particular retailer.
“One of the biggest pitfalls is when a vendor doesn’t take the time to understand us as a client and makes too many assumptions based on prior deals or other retailers,” said Steve Waldron, director of loss prevention for Danier Leather. “A vendor needs to be honest from the beginning. If you can’t meet a delivery schedule, don’t promise me that you can.
“My advice to vendors is to understand our needs by spending time with us–not time trying to sell, time listening and understanding,” continued Waldron. “Visit our stores, try to understand the operation, and consider a full year’s operation. Summer operation is definitely different than winter or fall.”
Making assumptions about communication is also a major pitfall. Both vendors and retailers expect open communication lines when it comes to resolving issues, relationship transitions, hiccups in the budgeting process, and absolute honesty regarding implementation issues.
“One of the biggest pitfalls from my perspective is the practice of pigeonholing customers,” said Pillsbury. “How a vendor treats a client shouldn’t be dictated by their store count or revenue stream. Communication needs to continually flow from the salesperson to the project manager and out to the service-level professionals as well. The salespeople must be knowledgeable about the product they sell and set the interaction up for success from the beginning by communicating effectively within their organization and maintaining that communication throughout the sales and installation process.”
Pitfall 2: Inconsistencies in the Process
In general, both vendors and retailers are troubled by inconsistencies in the vendor-retailer relationship process. Here the process refers to the sales, contract, implementation, and services processes, among others. The frustration on the vendor side is regarding inconsistent communication about the contract process and who ultimately makes a buying decision. The retailer community is most annoyed with inconsistent client contact and a high frequency of vendor turnover or being “passed off” to less-knowledgeable vendor account managers.
In his book, Guth states, “Frequent turnover of vendor staff who service an account is a leading indicator of a possible degradation in quality. Staff turnover can cause disruption to the customer, impact quality of service due to the new staff’s unfamiliarity with the customer, and require additional training of the vendor staff by the customer.” This ultimately leads the retailer to question, “Is this vendor swapping out higher-quality staff with lower-cost, lower-quality staff now that they have my business?”
Slaughter said, “It’s important to be treated as a priority. We understand vendors have multiple clients with varying needs. Even though we are not a huge chain, that doesn’t mean we should be last on the priority list. It should never be difficult getting a response from your vendors.
“It’s also very important that the vendor communicates well internally,” continued Slaughter. “It can be frustrating when people working on your account aren’t well-versed in your business challenges and that specific product’s solutions to those challenges. A downfall in customer service, in my opinion, is being passed off to an account manger after the sale has been made, and that individual hasn’t been briefed on all the pertinent, necessary information. Those types of poor transitions leave communication gaps and don’t create a feeling of urgency or priority.”
“Inconsistent people throughout the retailer-vendor interaction is frustrating and leads to poor project management,” said Danier Leather’s Waldron. “It takes more than an excellent salesperson to keep a customer satisfied with the product or service they have purchased.”
Panera’s Levitt concurred. “I believe it is also important to have consistency with vendor-retailer relationships. So many times I attend a trade show in a new year, and you receive a whole new set of business cards from the same people with different companies on them. Staffing consistency is a big indicator of the level of customer service you will receive from a vendor.”
Pitfall 3: Misleading Information
Anytime a vendor or retailer feels misled, it can be a major pitfall within the confines of a buying relationship. Several topics seem to be the most detrimental to the vendor-retailer relationship when the misleading occurs, either intentionally or by an honest mistake.
From the retailers’ perspective, the most damaging to the relationship is when they feel they are misled about the delivery of a product or service or the cost of the product or service.
Vendors’ largest frustrations center on misleading information on execution of pilots for retailers, being asked for return-on-investment (ROI) numbers without being given accurate metrics to complete an accurate assessment, and their product being treated as a commodity.
To Test or Not to Test. Vendors and retailers agree pilots can be valuable exercises. Testing a company’s products or services before you commit possibly millions of dollars to the project is a smart plan. The issue comes when vendors or retailers feel taken advantage of their willingness to provide product or willingness to open up a retail environment. A pilot turns to pitfall when clear expectations aren’t set, communication is dishonest, and the investment isn’t shared by both parties.
Vendors provided some candid feedback about this touchy subject anonymously.
“Have clear and concise expectations,” said a vendor in the camera technology market. “Retailers set vendors up for failure when they don’t define expectations of a pilot or test. It’s about mutual respect—the retailer respecting the amount of money and resources that go into a pilot, and the vendor respecting the time investment and skin in the game that the retailer has. Establish key performance indicators and, most importantly, if all those metrics are successfully met, move forward as promised.”
WG’s Wolfe added, “Retailers should determine if they really need the product before moving into a testing phase. The only way to do that is to sign a non-disclosure agreement and have a candid conversation about the challenges at hand. As a vendor, my organization should be able to speak both technically and practically about the product. Meaning, we should know how the product will work within the retailer’s technical infrastructure as well as how it will practically work for associates or loss prevention in the real world.”
A technology vendor with more than 10 years’ experience in loss prevention offered, “The worst situation is when retailers pilot and test solutions they never intend to buy. Why test it if they never had the budget or forethought to buy it anyway? It’s only wasting everyone’s time and a significant amount of money.” In an industry based on integrity, situations like this should never occur.
From an investment perspective, many stated it was important for both parties to have skin in the game when it comes to pilots. If the vendor-retailer relationship is one-sided from the beginning, that doesn’t demonstrate the commitment needed to embark on what will be a complex and time-consuming process for all. The investment by the retailer demonstrates they have organization support and have communicated the viability of the solution up the chain of command.
“There is nothing a retailer should get for free,” said another LP camera vendor. “If we as vendors start giving everything away, where is the skin in the game for the retailer? If you’re dealing with honest retailers that are truly invested in seeing your product succeed, they will want to share in the pilot investment in some capacity.”
A five-year vendor in the LP communication industry said, “A wise man once told me, ‘You don’t have to be talking to be selling.’ In fact, the less a salesperson talks, the more they can listen to the actual challenges retailers are facing. Retailers set vendors up for failure by abusing pilot scenarios and by not having any real intention to buy the products. I often ask myself, ‘Do retailers really even understand the investment required for a pilot?’ It’s important to be honest and upfront from the beginning. Lastly, don’t pretend you’re the check writer or decision maker if you’re not. It may be fun for your ego, but it doesn’t help the process for anyone.”
Put It in Writing. Some said just when they thought all the hard work was over, then it was price negotiation and contract time. When it comes to the final phase of pricing and the contract, this stressful negotiation can often be a pitfall. Misleading information about the actual contract details or pricing in general can be frustrating for both parties.
Vendors often feel treated unfairly when it comes to extreme discounts and other leverage retailers hold over their heads for a lower price. During these negotiations, retailers often request an ROI analysis. It’s difficult for vendors to provide an accurate ROI analysis when a retailer is misleading or doesn’t want to provide sufficient current and historical metrics.
“The ROI question is definitely one we get a lot,” said Brad Fick, president of Direct Source. “It can be a complex formula to determine, especially when you’re factoring in how much a retailer is currently paying just in maintenance of old equipment. It’s most helpful when a retailer is up front and provides full disclosure to the details of their challenges. If a retailer doesn’t provide all necessary information, of course the ROI information will be skewed, which might end up costing us the partnership.”
Turning products into a commodity negotiation is also frustrating for the vendor community that feels a complex solution should be evaluated in the same complex manner—looking at several key performance indicators, not one number.
Unfortunately, purchasing departments offer little help and are focused on what they do best—getting the lowest price and placing orders. In reality, the complexity of a technology system, training solution, or physical security products requires much more than price-to-price comparisons.
“Acquiring loss prevention solutions for a retail company is an art form best left in the hands of LP executives,” said Kevin Lynch, former executive director of business development at Tyco Integrated Security. “The variables that have to be evaluated to pick the appropriate vendor are too intricate to be left in the hands of a purchasing department. Reverse auctions are a death knell to any loss prevention department. If retail companies think that buying exception-based reporting systems, EAS, or CCTV is as easy as buying pencils or toilet paper, they are doomed to fail. Retailers need to evaluate the whole picture, financial strength of a company, quality of the equipment, installation teams, maintenance, financing options. I would advise any retailer to do their homework in a more forensic manner.”
“The vendor-retailer relationship should be ‘buyer beware,’ but retailers need to understand, we’re not making a ton of margin on these technology products,” said a loss prevention professional now working with a vendor company. “I think the misconception is we’re charging as much as we can to acquire the most margin possible, when the reality is, we’re already coming to the table with just enough margin to satisfy our bosses and close the deal.
“Most of the time I’d like to ask the retailer, ‘Would someone be allowed to shop in your store every day with a 75 percent discount?’ Of course, we would get laughed out of the room, but that’s essentially what the retailer is asking us to do.”
Another vendor with more than 15 years in the LP market said, “When comparing prices of products, it’s frustrating when retailers aren’t comparing apples to apples. It’s like asking the retailer, ‘Can I pay the knock-off price for this designer handbag?’ Of course they are going to say no. A tip for retailers is if the price is higher, most of the time there is a reason. A good loss prevention practitioner will investigate the price difference and really know the ins and outs of the two comparisons before basing a decision solely on price.”
On the other hand, retailers are frustrated with misleading information about hidden prices and unaccounted fees within a contract or service-level agreement.
“When I was in retail, a major issue that always bothered me was when vendors tried to minimize the total cost of the project and then spring unexpected costs on you last minute,” said Wolfe, now with WG Security Products. “Vendors should come to the retailer with an all-in price. It puts loss prevention professionals in a bind when they have to go ask for more money for an already budgeted project.”
Avoiding the Pitfalls
Creating a mutually beneficial vendor-retailer relationship is a long-term proposition that requires complete honesty, constant communication, and trust to avoid these pitfalls. Although it is an intense, time-consuming process to build an effective and beneficial partnership, the benefits far outweigh the negatives when two companies come together for the ultimate satisfaction of the retail shopper.
“Credibility is what keeps me in the forefront of some loss prevention executive’s Rolodex,” said Lynch. “If I maintain my personal credibility, then ADT’s reputation is also intact. It’s about putting out brush fires before they become forest fires. If you hold your company to a standard of excellence in support of the customer, you have gone a long way in cementing your place as a solid business partner. There are only two reasons to be in a retailer’s reception area. One, your solution will save them money outright, or, two, your solution will bring efficiencies to their business that will save them money. End of story.”
In his book, Guth describes one of the most important parts of the retailer relationship as vendor commitment. “Vendor commitment is a combination of customer focus, trust, sharing information, and other elements that demonstrate a vendor’s interest in helping a customer succeed. Of all vendor expectations, vendor commitment is the most critical to sustain an ongoing successful business relationship between vendor and customer.”
The former Newell Rubbermaid CEO Mark Ketchum describes the vendor-retailer relationship as going from customer push to consumer pull in the November-December 2010 issue of Business to Business magazine. He describes the customer-push mentality as when a vendor creates a product, puts it on the shelf, and then goes to the customer to ask, “What is it going to take to sell this?” With the consumer-pull mentality, the vendor works to understand consumers unmet needs and address them by offering a superior product or performance. Consumer pull means working with retail partners to produce something of real value, and that is the ultimate result of avoiding these pitfalls.
This article was first published in 2011 and updated March 13, 2017.