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Retailers, vendors must collaborate to improve customer experience

Paul Perry, a writer for Relay, explains how retailer-vendor collaborations will increasingly shape the customer experience and how to improve those partnerships in the ecosystem economy.

Photo by iStock.com

July 1, 2019

By Paul Perry, writer, Relay

While retailers are under increasing pressure to deliver enhanced customer experiences to compete with online giants like Amazon, their relationships with vendors are becoming more important. Why? Because they shape an important aspect of the customer journey — the first mile of it to be precise.

It's a challenging moment for retailers. More price transparency than ever before. Hyper-competitive markets with other retailers. The onslaught of online giants like Amazon.

The importance of providing better products and delivering engaging customer experiences in-store and online has never been greater. In an era when customers are offered a wide array of high-volume goods with same-day delivery, retailers simply have to change the way operate to stay competitive.

Adapt or die

This is where the relationship between retailers and vendors becomes critical. It's another aspect of the value chain where retailers and their suppliers can innovate to shape the customer experience. With as many as 44% of retailers saying that better collaboration with suppliers is one of the top three issues facing their supply chain management, retailers understand how such collaboration impacts customer experience.

You've got to get the first mile of the customer's shopping journey right in order to deliver a strong overall customer experience.

This evolving landscape calls for a much more collaborative relationships between retailers and suppliers, who have viewed their skills and relationships quite differently until recently. More and more businesses are getting together, sharing information and collaborating in new ways to exceed their mutual goals for the customer experience.

What's up with the retail-vendor disconnect

Let's first figure out how and why retailers and vendors can often be so out of sync.

For one, they're often focused on different priorities. Here are some examples of how that plays out:

•    Technology: While retailers are more interested in using a vendor's technology until they can afford or need to replace it, a tech vendor will often walk away from supporting older versions of their technology regardless of whether retailers are ready to upgrade.
•    Focus: Retailers are focus on the customer experience in the context of retail. Vendors often focus across a broad range of industries.
•    Perspective: Retailers typically assess vendor performance through a narrow perspective based on their own interests. Vendors often have a large client base and a wider perspective across hundreds of clients.

There are also more contextual problems that exist within the relationships between retailers and vendors:

•    Culture: Communication and linguistic barriers with overseas suppliers.
•    Forecasting: Different demand forecasting capacities between retailers and vendors.
•    Competition: Online giants (i.e. Amazon) developing private label programs that move into suppliers' "territory."
•    Information: Retailers and suppliers lacking access to the same customer information.
•    Content: Differences in the use of product content between retailers and vendors.
 

Such differences lead to false assumptions, inconsistencies in processes, and misleading information—all major drivers of relationship failure between retailers and vendors.

To overcome this, many retailers and vendors are changing their perspective on their work together. This shift has retailers no longer asking who is responsible for customer satisfaction but which of their vendors are responsive in ways that help them improve the customer journey in the retail context.

This is a major shift that takes the conversation between retailers and vendors from a product-centric focus to one centered on service and satisfaction (much more customer-centric).

The simple reality is this: retailers and vendors must shift from transactional interactions toward collaborative relationships.

Improving the customer experience together should be their mutual North Star. Those retailers and vendors that pursue rapid innovation and customer satisfaction together will win.

So how does that get done in practice?

First and foremost, relationships between retailers and vendors must shift from being based primarily on price and negotiations over products to partnerships focused on value creation for customers.

In short, retailers are searching for four essential capabilities from their vendor partners:

•    Customer insights management.
•    Merchandising strategy development and execution.
•    Product development and supply chain.
•    Transition planning and execution.

At the core, these capabilities are about capturing and leveraging data to constantly improve the ways retailers can deliver for customers.

This means sharing information to empower streamlined decision-making about meeting evolving customer demands. Such a shift will also mean new investments that will expand the capabilities of retailers and vendors alike:

•    Agile product innovation.
•   Improved accuracy for merchandise transitions (including go-to-market).
•    More flexible supply chain fulfillment.
•    Expanded consumer and market insights.

As collaborations between retailers and vendors grow and take shape, it will be increasingly important for both parties to capture holistic information through consumer research that helps them better understand customer needs through the entire purchase cycle. Once they've done that, they'll need to figure out ways to act on that shared information effectively and rapidly.

Two things are happening simultaneously here: the consumer data is growing exponentially while the need to discover and leverage consumer insights (in hyper competitive retail markets) is expanding rapidly as well.

Business ecosystems are increasingly becoming the future of customer experience. The extent to which retailers and vendors can stitch together highly-effective partnerships within these ecosystems will determine the quality of customer experiences and their ability to thrive in the market.