At your retail service

For a fraction of the cost of hiring your own merchandising team, sales agencies can be your “eyes, ears, arms and legs” at the stores

Maintaining cost-effectiveness and a nimble response to the evolving demands of the marketplace are requisites for survival in any industry. In this regard, small to medium-sized businesses trying to secure a foothold in Australia’s $40 billion hardware industry are facing unprecedented challenges.

Intensified competition, in part due to the arrival of a second big box, has spurred market consolidation and prompted the revising of retail strategies, which inevitably place greater demands on suppliers to provide retail merchandising support. Instead of expanding product range to stave off direct competition, the retailers’ combative rationalisation of store offerings often results in reducing the lines that they carry. Despite this, the industry has seen an unabated increase in new entrants comprising local and overseas suppliers.

This effectively means a bigger pool of brands vying for the same dwindling shelf spots, even as suppliers are called to take on increased responsibilities. Meanwhile, to keep heads above water in uncertain economic times, product managers are further tasked to lower their overhead expenses.

It is against such a tough retail climate that more hardware suppliers are turning to third party agents to assist or undertake the merchandising aspects of their business. In offering a wide range of representation services, sales agencies help suppliers realise the specialised efforts in retail support that many of them are either under-equipped or not able to perform on their own.

Regular, instantaneous and accurate feedback Although not direct employees of the stores or vendors, third-party agents are able to perform the bulk of vendor merchandise roles on the suppliers’ behalf. Such duties generally cover product fill-ins, product replenishment, set-up and removal of POS displays, packing and delivery as well as placing stock re-orders. Mundane as their work may seem, the true measure of a sales agency’s worth lies in its ability to increase a product’s speed to market and maximise its in-store exposure. The good ones are constantly surveying the market dynamics, re-evaluating their roles and improving their services to stay current in the high strategy game. And pivotal to these endeavours is getting regular and accurate feedback from both customers and the retailers.

Says Keith Nicol, national sales manager of Classic Duo: “If you don’t know what the clients want at any given time, you can’t possibly know how to act on their behalf or service them properly. With 83 per cent of our sales force made up of full-time representatives, we are able to call our customers on a weekly basis, and update ourselves on their most current needs.”

As with the clients, Classic Duo representatives hold monthly or bimonthly meetings with Bunnings’ VIS support teams and independent equivalents to understand the requirements of all parties. Instrumental to their success, Keith adds, is an unwavering belief in two-way communication, which has been rendered instantaneous by Cerlio, a web-based reporting system.

“With Cerlio, it is possible to transmit live data to and from customers as fast as the Internet connection allows. Wherever our reps are, they can deliver up-to-the-second service running off ipads, iphones or android devices. Customers can give immediate instructions through their designated portals.”

Another key to getting good feedback, says Paul Baxter, acting director and manager of Paul Baxter Agencies (PBA), is making sure they are not filtered in any way.

“Agents should work out ways to get impartial feedback from both the clients and the stores on their own performance, warts and all. With that feedback, they can make the necessary changes – and put measures in place – to improve their service.”

Paul proposes the ability to juggle the interests of retailers and suppliers is what marks an agent’s competency: “The trick is to contract a third-party agent who has intimate knowledge of both the other stake holders. Agents born from one side of the fence or the other can have less than optimal perception of the big picture.”

This balancing act entails tailoring the services to the supplier’s requirements while making sure they fit within the retailer’s prescribed Vendor In-Store (VIS) program. The VIS program serves as centralised communication under the Vendor-managed Inventory (VMI) model, that specify details like call frequencies, POS information, order point data, suggested release quantity etc.

agentsKeeping both sides happyBased on the VMI system, the store (or product buyer) provides certain information to a vendor supplier of that product and the supplier assumes full responsibility for maintaining an agreed level of stock at the store location. This guided, symbiotic relationship makes it less likely for the store to be ‘out of stock’ for a particular good and reduces inventory in the supply chain. Vendor representatives, either in-house or third-party, also have vested interest to ensure that the product is well presented, clean and organised.

Paul adds: “Corporate stores have a written expectation evident in a Vendor In-Store program. Independents have their individual expectations. Some allow “licence” to the merchandise team to use their knowledge and experience with what they have seen work before, where others allow less flexibility and want the program to be done strictly to their guidelines.”

Following the VIS program to the letter is essential but doesn’t negate agencies taking the initiative to offer clients timely advice on ad hoc issues, says A-team Merchandising’s director Lyn Coghlan.

“If we noticed, for example, that our client has got an ‘out of stock’ that is not due for 3 weeks, we could even place an order on their behalf. Of course, this is contingent on the client’s instructions from the outset, which pre-determines the parameters of our services.”

A-team’s nation-wide inventory management program offers customers a choice between a full outsource function or a new adjunct service that provides clients extra support between call cycles. The company employs 75 strategically located merchandisers throughout Australia, supported by a back-up tactical team of around 15 to assist in surge projects.

“Our sales support team are in Bunnings everyday as part of our regular journey plan, and that keeps our costs low. As part of our new ‘Sales Support’ service, we can work with your sales team to supplement your efforts with a short, cost effective call.”

Quick action in special circumstances Such cooperation can become a critical asset in the case of an emergency. When a well-known brand had to be pulled from Bunnings shelves over a safety issue, A-team was mobilised in a snap operation to recall the faulty products almost overnight. Within the targeted 48 hours, the merchandisers had moved in swiftly, working alongside the supplier’s team to remove, shrink-wrap and stack the products onto pallets before contacting the transport company to collect the goods.

Another incident involved a Classic Duo client that failed to receive retail orders due to an EDI malfunction. Thinking on their feet, the agents rectified the problem by reconveying – while verifying – the numbered orders to make sure they were being tracked by the supplier so that the retailer would not be saddled with an “out of stock” situation.

The task of putting a new line onto the shelves also requires speedy action and time-consuming effort best entrusted to national merchandising agents. Dynamic Sales Australia is one such company that offers highly efficient product introduction or recall services. Ian Hutchison, the company director with over 30 years’ experience in the hardware business, claims it is possible to implement a new product line throughout Bunnings’ 200 plus stores within a week.

With a national sales team of 65, Ian proposes that his staff can deliver equal or higher outputs than firms with larger staff size. He cites a results-oriented management program as example of their intensive staff training that gives them the competitive edge.

“All of our staff undergo the Total Quality Management (TQM) program, which is a comprehensive approach to organisational management. It gives our staff confidence in knowing what they are measured on and clear guidance on what is required to obtain objectives.”

In the same token, Ian believes that third-party merchandisers can offer suppliers access to market intelligence that will give them a sound footing with major retailers.

“Most suppliers are good at manufacturing and sourcing but don’t deal with retailers on a regular basis to fully appreciate the requirements within the organisation. With my background in store and sales management, and 14 years in the agency business, I am able to develop win-win merchandising solutions to benefit both the retailer and supplier.

“I attend key supplier meetings with large retailers that provide important information on their expectations and reporting systems. These training sessions are provided exclusively to key suppliers – around 20 per cent of their supplier base. With my access to such critical information, I can assist smaller players by taking them into the loop and bringing them up to date on industry knowledge that they wouldn’t previously have access to.”

Cost efficiencyThe most immediate benefit of employing a sales agency has got to be cost efficiency. It’s based purely on an ‘economies of scale’ principle: To an agency, the cost of hiring a merchandiser can be spread across the number of client jobs that the worker undertakes, while he or she services the same number of stores. Unlike the employee of a supplier that only services one product or product line per store, an outsourced merchandiser can take advantage of the work volume to lower cost per supplier job. Shared costs also mean reduced travel and other incidental expenses.

Paul rationalises: “Per “head”, an agent saves the client a lot of money. If the alternative is to use their own people (i.e. sales representatives and/or account managers) the initial cost savings are the tools of trade such as company cars, phones, computers, travel expenses and salary. The other very real cost is the loss of sales their own salespeople are missing by using their time in “operational” duties that can easily be serviced by agents. They could be seeking new and developing business in other channels of the market.”

Time and travel costs become more pronounced when servicing regional stores. National sales agencies that operate through a wide network of well-placed merchandisers can help close the distance between suppliers and the regional stronghold of the independents.

Lyn puts it squarely: “With independents, it’s all about relationship building. If they’ve got three lighting suppliers, they’ll go to the one that helps and supports them the most. Unlike the corporates, their range is determined at the store rather than the head office. To some degree, when you sell to independents, the one that goes in there every month gets the business.”

At the day’s end, whether it’s an independent or big box, Lyn qualifies the work of a sales agent as simply an extension of the supplier’s “eyes, legs and arms” at the stores.

“Because we’re at the stores every day, dealing with store managers and observing the in-store trends, we become quite alert to the subtle changes in that environment. We can help to either prevent an issue from developing or identify an opportunity. Basically, we do a lot more behind the scenes than just replenish stocks.

“While all that is part of our job to stay relevant in this business, it also helps us to keep suppliers on top of the game.”