4.3.4. Advantages working with retail chains

“Ja-Natürlich” the organic product label of REWE Group in Austria.

The growth rate for the SPAR “Natur pur” logo is remarkable. After Mr. Gerhard Drexel, CEO SPAR: “growth rates are over 20 %. More than 1.000 organic products are sold under this brand – among approx. 4.000 in total.”

Mr. Drexel further outlines: “The secret of success is a clear focus on “regional origin”. Austrian suppliers enjoy preference in case of equal quality. 10.000 Austrian organic farmers benefit from this.”*

*source interview in “Key Account” trade journal 2020/6

That seems at first sight not favourable for the Ukrainian exporter. But note: You may supply when you have

BETTER QUALITY (MAYBE A BETTER PRICE ALSO COUNTS) A UNIQUE PRODUCT A PRODUCT NOT ABLE TO SOURCE IN AUSTRIA (AT THIS TIME, AT THIS QUANTITIES) …….

The mentioned figures above are for Austria. Take these – multiply by 10 – and you do have the equivalent figures for Germany! That means under the private labels of REWE, EDEKA, etc. …. waits a potential of many billions of € for your as a potential supplier. Within these private labels is considerable room to sell your products.

4.3.4.Advantages working with retail chains +++ Defined time and quantity

Contracts refer to a certain quantity, often a large ones & over a defined period of time. This is a good ground for planning.

+++ Minimal risk of non-payment

As a matter of fact retail chains are huge companies and very seldom fail. And even when they fail they got bought by competitors, usually overtaking liabilities.

+++ Large scale deliveries

Logistic systems of large retailers are designed for large deliveries.

But not every product category may count on full truck-loads. With more specialized retailers with limited number of outlets be prepared to quote and to deliver pallets.

When you do have e.g. an organic snack with 1.000 sales units on the palette and customer is organic retail chain with e.g. 50 outlets they will not take more than a few pallets from your product. Or they will ask you to go for an importer and come back with an indirect offer.

+++ real presence on the market – visibility

Being on the shelf of a (large) retailer means you exist for the the majority of buyers. Unfortunately retail is highly concentrated. And when you fail being listed with the 10 or 15 possible target companies you are forced to go for a niche market . But in the niche your visibility is extremely limited. The majority of buyers do not see you there.

4.3.5. Disadvantages working with retail chains Strict/demanding and risky contracts in terms of: --- Product liability (conformity to regulations) and compliance with regulations, standards, laws, etc.

Contracts demands your guarantee that products fully comply with regulations, standards, laws, EU guidelines, …………………You will read many clauses about this – with lots of liabilities and risks at your side.

Careful consideration, professional advice and a good product liability insurance is necessary.

--- Costs

Many contracts stipulate costs to be paid by the supplier as e.g. product inspection costs, manipulation fees, fees failing a (short) delivery interval at customers warehouse, fees for any kind of shortcoming.

--- Contract obligations

Many obligations / few rights for you as the weaker partner – that have many of these contracts in common.

--- Listing fees

Such fees are usual and carry different names. They are from the legal point of view not problematic and not forbidden. But do not forget them in your calculation. In case you are confronted with such a demand after you quoted, insist to amend your quote accordingly.

--- demanding administration

Retailers sometimes demand to quote, confirm orders, and administrate the whole business process in a special supplier section in their IT system. Means you need to train a person to do so and take care for a back-up. Changing rules, regulations, laws or simply constant new demands of the buyers are frequent, always urgent and always unpaid. Even a lot of work is to do. Look what is printed on an average packaging. Recycling labels, organic labels, importers, … every necessary change you will administrate – and bear the costs. --- formal, sometimes inflexible communication

Large retailers handle thousands of suppliers. This requires of course formalistic procedures. This is often perceived negatively at supplier side. But it is in the nature of the deal and the related communication needs.