14 Oct Realities Affecting Retail Negotiations
When it comes to effective negotiation practices, there’s no shortage of theories, philosophies and techniques out there. But retail, particularly for the large organizations we work with, is a unique environment:
- The pace is faster: Anyone who has worked in retailing knows the pace in general moves faster than other industries, and the same goes for retail negotiations. Since much of the retail busines is seasonal, you have to get it done quickly so the right merchandise is on the floor in time for the customer. If it drags on, sales may be lost—and never recouped.
- There are more variables involved: When you plan a retail assortment, price is only one part of the negotiating “package,” which may also include delivery, returns, co-op ad money, and more.
- Customers shape direction to a much greater degree than in other industries: While retailers and vendors can control the scope of a particular negotiation, they can’t control the messages customers send—messages that can affect strategy and profitability.
- Issues and variables change daily: Variables such as production capacity, shipping, quality and/or price increases, raw material scarcity, global governmental agreements, and others all conspire to get the original “deal” off track. Many come as a complete surprise—and happen at the worst possible time—requiring a heightened level of agility and focus under pressure.
- Negotiation occurs with industry specialists: Both sides of the equation have unique and highly specialized expertise. The good news is there is great opportunity for building long-term, powerful partnerships.
- Retailers who negotiate typically have broad financial authority: It’s not unusual for the buyers we work with today to handle up to a billion dollars of Open-to-Buy. That’s tremendous “purchasing power.” The onus is on the retailer to make smart, profitable decisions.
- Strategies are readily visible to the competition: And that means the competitive playing field is quickly leveled.
These aren’t the kinds of issues traditional negotiation strategies take into account.
What has been your experience with negotiation in today’s retail environment? What are the most important issues you’ll be focusing on as the markets near? Share your thoughts in the comments or tweet us @mohrretail.
PS. Download our primer, “10 New Negotiation Mindset Approaches,” to find out what our research has shown about effective retail vendor negotiation strategies.