Brand Negotiation in Retail
Improving margins through strategic supplier partnerships and professional negotiations
A large department store group stocks over one million items from around 2800 suppliers from all over the world. Of these, around 700 are local producers who supply seasonal products.
Objective: Raise efficiency of brand negotiations to a new level
In response to the increasingly difficult market environment for department stores, the retailer pursued various measures to improve its competitiveness. Most notably, the company sought to professionalize its annual negotiations with brand suppliers in order to increase margins. We were commissioned to drive this forward and, together with procurement, to conduct annual discussions with the top 250 suppliers. In addition, the project was to create processes and introduce methods to enable procurement to continue on the chosen path and achieve sustainable results.
Structured approach, digital processes
Before the start of the actual negotiation rounds, the project was first about creating transparency. With the help of advanced analytics tools, we analyzed the entire spend of the department store chain and presented it in compact dashboards in a graphically clear and transparent manner.
For example, in the next step we used digital tools to calculate the profit margin and compare it with benchmarks to show potentials for the subsequent discussions. In parallel, we built a negotiation calendar that maps the entire process and provides dashboards with all relevant information on specific commodity groups or suppliers at the push of a button. The tool guides procurement staff through the entire negotiation process and thus forms the basis for all relevant steps.
Since the focus was on sustainable structures and results, the close cooperation between our customer’s procurement department and our consultants was particularly important during the project.
We supported the employees very closely during the negotiation rounds – from the preparation and creation of the negotiation documents to the implementation and final tracking of the negotiation results. In addition to the digital calculation tool, we also provided the procurement staff with a detailed negotiation guide that clearly describes the individual process steps and responsibilities.
The roles for the jointly conducted negotiations were clearly defined – we were the lead in some discussions, while the procurement staff conducted other discussions themselves.
In this way, we created a culture of “learning from each other” and helped the employees to further professionalize their negotiations with brand suppliers. Through digital process support, we were able to increase the efficiency of the department and ensure governance by means of seamless recording of all relevant steps.
Result: Professional execution of the brand negotiations
- Overachievement of savings targets
- Training of over 80 procurement staff
- Ensuring governance
- Negotiation guide with step-by-step instructions
- Comprehensive templates for negotiation presentations
- Calculation tool for goal setting, live simulation during the negotiation and result controlling
- Benchmarking tool for suppliers at individual condition level and category comparisons