Relationships between the Giants in Retailing: how WalMart and Procter&Gamble trade together - from Fear to Trust prevalence in the Supply-Chain
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document in English
business strategy
case study
published 14/12/2006
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SummaryThe paper shows how the relationships between suppliers and retailers have experienced several important changes over the last decades. By analysing the main developments of these relationships and the different tools implemented to improve them, the paper argues that the western and now worldwide, business to business approach to retailing is following the same trends. Based on two of the largest partners in the worldwide retailing environment, Wal-Mart and Procter & Gamble, the paper illustrates how the buyer’s market has gradually resorted to a cooperation strategy the supplier-retailer relationship, emphasizing the features of Category Management.
Over the last several years, the nature of the buyer-supplier relationship in retailing has been undergoing dramatic changes. Industry observers and researchers have described these emerging relationships as "partnerships" or "strategic alliances," as opposed to the traditional "arm's length" type of associations. The supplier’s market had been followed by the buyer’s market due to concentration amongst retailers between the 1970s and 1990s which have given the latter most of the powers. But these conditions are likely to change too.
The acquisition of Gillette by Procter & Gamble is the sign of a new evolution in the retail environment. Like this newly-formed group, big manufacturers tend to create the world's largest stable consumer brands and hold on to their portfolio brands that generate more than $1bn in annual sales. This will deeply affect the prevalent relationship between retailers and manufacturers on a long term perspective.
Despite the rise of own-brand products, a worst-case scenario is not likely to happen, as the concentration among retailers faces the concentration among their main suppliers. Thus, relationship between retailers and suppliers which used to encounter conflicts of interests might now enter a turning back of the clock. As Kumar (1996, p92) notices, “trust is stronger than fear: partners that trust each other generates greater profits, serve customers better and are more adaptable”.
This paper analyses the reasons why retailers and suppliers are developing less conflicting relationships firstly in regards to their historic development and secondly in the light of the notions such as Trade Marketing, Partnership and Category Management. The case study of Procter & Gamble and Wal-Mart supports the presentation of the arguments employed in this paper.
Over the last several years, the nature of the buyer-supplier relationship in retailing has been undergoing dramatic changes. Industry observers and researchers have described these emerging relationships as "partnerships" or "strategic alliances," as opposed to the traditional "arm's length" type of associations. The supplier’s market had been followed by the buyer’s market due to concentration amongst retailers between the 1970s and 1990s which have given the latter most of the powers. But these conditions are likely to change too.
The acquisition of Gillette by Procter & Gamble is the sign of a new evolution in the retail environment. Like this newly-formed group, big manufacturers tend to create the world's largest stable consumer brands and hold on to their portfolio brands that generate more than $1bn in annual sales. This will deeply affect the prevalent relationship between retailers and manufacturers on a long term perspective.
Despite the rise of own-brand products, a worst-case scenario is not likely to happen, as the concentration among retailers faces the concentration among their main suppliers. Thus, relationship between retailers and suppliers which used to encounter conflicts of interests might now enter a turning back of the clock. As Kumar (1996, p92) notices, “trust is stronger than fear: partners that trust each other generates greater profits, serve customers better and are more adaptable”.
This paper analyses the reasons why retailers and suppliers are developing less conflicting relationships firstly in regards to their historic development and secondly in the light of the notions such as Trade Marketing, Partnership and Category Management. The case study of Procter & Gamble and Wal-Mart supports the presentation of the arguments employed in this paper.
Table of Contents
- Defining the relationship between a retailer and a supplier
- Trade Marketing
- Partnering
- Category management
- The relationship between Procter & Gamble and Wal-Mart
- Extended Conclusion
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