January 19, 2006

It isn't just an American thing

It probably won't come as much solace to an account manager coming out of a tough negotiating session with a key account, carefully counting his fingers to see if the buyer took a couple while they were shaking hands, but things are no better in other parts of the world.

Though our readers are predominantly American, we have worked enough in other countries and with enough suppliers and retailers/resellers in those countries to know that pretty much the same practices prevail in channel relationships everywhere.

The basic question is: What is the power balance between the suppliers and the end-sellers? Wherever that balance has tipped drastically toward the retailers, life becomes miserable for the suppliers.

I was reminded of this when I was reading about a small-business group in the UK, the Forum of Private Business (FPB) that is complaining to the Office of Fair Trading (the UK's FTC) about the increasing dominance of Tesco-which now has a third of the grocery market in the UK, and may soon have as much as 45%, as well as dominance in convenience stores.

One of FPB's complaints about Tesco sounded particularly familiar: ". the bully boy treatment of suppliers, a practice in which Tesco is a prime offender."

Slightly off-topic, but I think it will amuse you: Lee Scott, Wal-Mart's honcho, said recently that the OFT should investigate Tesco because it was getting too big. According to the BBC:

Wal-Mart boss Lee Scott said the government had to investigate Tesco's continuing domination because it was so difficult for rivals to try to catch up.

"As you get over 30% and higher, I am sure there is a point where government is compelled to intervene, particular in the UK, where you have the planning laws that make it difficult to compete," said Mr Scott.

Nobody gave Scott much sympathy.

Also in December, another leading UK retailer, Halfords, sent all its suppliers a notice that in the new year it was expecting a 5% cut in prices, a 2.5% increase in rebates, a change from 90 days to 120 days for payment, and increased advertising support.

Based on the calculations on this site a supplier would need a sales increase of more than 25% to restore margins after giving Halfords everything they demanded.

Again, this might not make you feel any better but at least you know that key account managers and channel program managers in the UK have a life that is just as rough as yours.

For more news and comment on a daily basis visit our blog, TPMtoday. Among the topics in the past few days:

Return to News & Events

©2006 HoukTPM
238 Arbon Court
Crete, Illinois 60417-1121
+1 (708) 758-0748

E-mail: info@houktpm.com