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    Retailers Hold Balance of Power: Cannondale

    According to the 2009 Category Management Study released by sales and marketing management consulting and software solutions firm Cannondale Associates, the balance of power between manufacturers and retailers has shifted toward retailers, and this trend is expected to continue.

    According to the 2009 Category Management Study released by sales and marketing management consulting and software solutions firm Cannondale Associates, the balance of power between manufacturers and retailers has shifted toward retailers, and this trend is expected to continue.

    Five years ago, manufacturers and retailers say they held equal shares of power in their partnerships, but today, manufacturers believe that retailers control almost two-thirds of the overall power and will extend their control to 71 percent five years from now, while retailers believe they currently control 60 percent of the overall power, and expect to control nearly two-thirds in five years’ time.

    Manufacturers see retailers especially exercising their power via insights ownership, marketing expertise and thought leadership, and retailers concur that they’re gaining ground and will dominate these areas in another five years.

    This power shift is attributable to retailers’ heavy investments in intellectual capacity over the past decade, which has given them proprietary data and competencies to interpret and act upon, and thus enabling them to be less dependent on manufacturers’ influence when devising strategies. For instance, some retailers have employed loyalty card data to identify their most valuable shoppers and develop programs to retain them.

    “Manufacturers have seen this coming for a long time,” noted Bob Hilarides, managing director at Wilton, Conn.-based Cannondale. “The good ones have been working to develop some unique capabilities that add value to the retailer and preserve their influence in store. They know that marketing right at the point of purchase is the most impactful means of changing shopper behavior, and they cannot afford to cede it to the retailer completely.”

    With their greater power, retailers are demanding more from manufacturers, which must in turn be selective as to where they can provide the most value, since they lack the resources to provide customized, detailed processes to all trading partners, Cannondale advised.

    “The companies that are best at differentiating themselves today are choosing to truly excel in just two or three areas, based on their trading partners’ needs, competitive gaps and their own core competencies,” explains Hilarides. “In the other marketing areas, they may choose to be just competitive, and not try to stand out.”

    Those companies that are selective in which new strategies they embrace as a means of differentiation are likely to maintain their influence and be successful in the future retail environment, Cannondale said.

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