Katherine Rich: Recalibration of supplier-retailer relationship needed

8 August 2014

For any type of business negotiation to be successful there has to be a degree of trust and respect – trust that the person on other side of the table is playing with a straight bat, and respect for the position they represent.

It’s also about playing fair.

The self-help American book ‘Negotiating for Dummies’ perhaps sums it up best when it says "It's about closing the deal in a way that makes both sides feel good about the outcome. Both sides should feel as though they achieved something that is workable and that everyone involved in carrying out the deal will want to make it work."

Put another way, it’s about leaving something on the table for the other guy.

It’s exactly the same in the supplier-buyer world of the grocery sector.

Readers will be aware that New Zealand has the most concentrated grocery retail market in the world, with two companies controlling around 95% of it. Suppliers selling into this market are at a big disadvantage – certainly more so than if there were three or even four retailers, where they would have at least a little more leverage during negotiations.

In such a concentrated market it’s even more crucial that trust and fairness prevail, particularly on the part of the side holding most of the cards. Unfortunately, that has not always been the case, and supplier reports to FGC point to a big change in the tone and style of negotiations in certain parts of the sector since last year – and not for the better.

All the more reason, then, that we need to take a good hard look at the business culture in the grocery sector and why we must change it.

Already there is goodwill out there.

Take Foodstuffs’ ‘Supplier Relationship Guidelines’ as a positive example. They talk about aiming to operate “within reasonable, ethical and sound commercial guidelines”, that they “value strong and positive supplier relationships”, and that it’s “important to acknowledge this value, to respect this partnership and, as a result, commit to conducting ourselves in a courteous and fair manner”. Further, one of their business principles says they want their supplier partnerships “to be based on working together in an environment of goodwill and trust …”

It’s a fair and values-based approach to business dealings rather than a prescriptive approach.

FGC has long held the view that negotiations between suppliers and retailers should be robust, fair, and allow for an exchange of ideas between parties. The grocery industry is a dynamic place, and no supplier expects grocery negotiations to be a cruise. What they do expect is to be treated fairly and to have a chance to state their case.

What they don’t expect is bullying. Everyone knows the difference between robust dealing and bullying, and it’s easy to deny that bullying has occurred. But those who are ever accused need to remember that bullying is very much in the eye of the beholder.

The Commerce Commission investigation has been a long and challenging process for some companies, but it’s important to remember that this could be a once-in-a-lifetime opportunity to change the grocery culture for the better.

There’s no doubt that there needs to be a recalibration of the supplier-retailer relationship. We need “value”, “respect”, “courteous”, and “fair” to describe every part of every negotiation on every shop floor every day of the week.

Only when we have that can we truly achieve what matters – giving consumers the best value for their money.