Retailers who don't yet understand the business case for collaboration throughout the supply chain might be wise to have a chat with an investment banker.
The banker likely will talk about consolidation in the industry and the retail chains that have gone belly-up.How is that trend related to collaboration?
Retailers on the decline often have lost touch with their consumers, explains Paul Mariani, director and food and agriculture practice leader at Variant Capital Advisors, a middle market investment bank in Chicago. Collaboration can be a highly effective way to better understand consumers and better serve them with the right amount of inventory at the right price.
The specialty retailers that have come on strong in recent years work closely with their suppliers to give consumers the fresh, healthy, innovative products they've come to expect. "The Fresh Market, Whole Foods and Sprouts–they've carved out a wonderful niche. They understand their consumer better than anyone. They're picking up share with higher margin products," Mariani says.
The growth of specialty players coincides with the so-called "locavore" trend of shoppers seeking out products grown or made locally. A recent A.T. Kearney report indicates sales of local foods have climbed 13 percent annually since 2008 to become a $9 billion market. To encourage production of locally grown food, Whole Foods provides about $10 million in low-interest loans to independent producers, A.T. Kearney reports.
"What the CPGs are realizing is they need to be responsive to this change in consumer purchasing complexity....It probably calls for a more partnered or collaborative approach, so the CPGs along with the retailers can be more flexible and more responsive," Mariani says.
"What the CPGs are realizing is they need to be responsive to this change in consumer purchasing complexity....It probably calls for a more partnered or collaborative approach, so the CPGs along with the retailers can be more flexible and more responsive."
Variant Capital Advisors