Bright future for sales and merchandising companies
In-house sales team versus outsourced services, the choice is down to product suitability.
By David Burton
Let’s start with a bold statement. Outsourcing the sales and merchandising function isn’t something for every company. Some products are just too specialised to not have their own in-house sales personnel. These in-house sales people are dedicated to the company cause, and can be exposed to continuous learning as technological breakthroughs are applied to their products.
For all others, you’d be mad not to at least talk to some sales agencies to find out what they really can offer. Particularly in these days of vendor refill at the big box operators.
Many options in agency choice
Most sales agencies offer teams that can be split into two options. Pure merchandising; which will address authorised range, on shelf availability (OSA) and pricing. Promotions can be monitored and reported on as part of this service.
The second option in a sales agency, and the one most likely to appeal to manufacturers and importers with more specialised products and larger range, is the dedicated sales team. This is a team whose primary objective is to work with independents, or any other retailer for that matter where specialised knowledge is part of the remit.
The benefit for a manufacturer in having a sales agency provide a dedicated field force (which usually wears the company polo shirt or other identifying uniform), is that back end costs are shared by the said agency across all of that sales agency’s clients.
Another benefit for the manufacturers is that all hiring and firing costs, associated with an outsourced dedicated team, lie with the agency. In a case where agencies lose a client (and this does happen in the real world) agency staff can be redeployed to other clients or general store support calls. This is not an option with in-house sales force structures where any retrenchments are permanent and costly. Even worse, they set the structure in stone for quite some time ahead. Agencies are flexible, and while none like to lose business especially in a competitive environment, they have a knack of redeploying staff.
Preferred solutions are coming
In supermarkets the appointment of Crossmark and AMC, as preferred merchandisers to Coles two years ago, was decried by the sales agency industry as creating a duopoly of preferred providers.
Now, while it is true that these companies, which are also strongly represented in the hardware channel, have taken on new business, they have also shed clients to other merchandising services along the way. Looking at supermarkets as an example of preferred merchandising systems, it is clear to see that two years after the announcement and onset of the preferred system, the other merchandising agencies are, in the main, still thriving.
While Crossmark and AMC have the benefit of accessing Coles Supermarkets’ in-store data to assist with management of their client’s brands, there has been continuing support for companies that are currently able to get the job done without access to such data.
Determine the type of service you need
There are sales agencies in the Australian hardware and home improvement segment to meet the needs of the majority of manufacturers selling into this $42 billion segment – if you take the broadest measure of channel value used by Bunnings and Masters. With the increasing trend of retailers moving to computer replenishment systems, the need for expensive dedicated sales people has changed. Agencies can provide cost effective representation for companies on agreed call cycles or specific projects.
A range of services that might be engaged from a sales agency includes: direct sales, vendor refill, traditional merchandising, cutting in new lines and promotional support.
Add to this educational presentations in store on how a particular product is used and a well briefed sales agency can meet the needs of all but the most complex products.
Mitre 10 as a true independent network, along with Home Timber & Hardware Group’s independent stores, presents the ideal opportunity for agency sales teams to build up relationships with individual store owners. Whilst head office sets the catalogue promotions and preferred range, stores can source additional lines to top up any perceived gaps in a range.
That said, the future strength of independents lies in getting behind head office approved ranges and promotions, while still being flexible enough to also stock items that Bunnings and Masters are never going to carry.
Having struck up a relationship with my local independent hardware store and spent time chatting about matters affecting the industry, it is plain to see that having one rep present a portfolio of six different company ranges is far more efficient than six companies individually vying for time with this time stretched operator.
When selecting a sales agency for the first time, each manufacturer will go into the negotiation with their own set of preconceived ideas on the services they require. Depending on an individual manufacturer’s range and product attributes some of the key services that will be discussed include:
•Dedicated hardware merchandisers
• Mobile and online communication, as well as reporting (including competitor activity)
• National relay projects, new line cut in and range compliance
• Business manager to support your business
• Stock ordering and management at store
• Product knowledge information for store team members
Regional versus national agencies
With Bunnings’ centralised buying and the ‘every store work the same plan’ style of operating, a national sales agency can make better sense. The same could apply to Masters, but on a much smaller scale.
For independents like Mitre 10, Home Timber & Hardware Group and HBT, the use of state based agencies is an opportunity to leverage the knowledge and contacts that such agencies enjoy within the local state independent segment.
This will include meetings of the local hardware association and social events where the chance to network is useful.
Also, a group of state based agencies is likely to give the same level of coverage as a national business. For smaller manufacturers it will be much more effective to be a big fish in a smaller pond rather than whitebait swimming in the ocean.
The suitability of engaging a sales agency and entrusting future sales growth to an industry professional can be determined quite easily.
These companies and individuals are always on the lookout for new business opportunities and will respond to requests for information and meetings.
I suggest there is no better time to research your opportunities than after reading this article. You have absolutely nothing to lose by making some inquiries.