Digital Strength & Innovation in Power Partnerships
Retailers and suppliers that have chosen to be transparent in their partnerships, open in their strategies, generous in sharing insights and opportunities, aligned on metrics, and collaborative beyond traditional commercial areas have gained each other’s trust and consequently outperform their peers, McKinsey & Company reports.
Manufacturers that are clearly winning relative to their category are those that have deepened and broadened their collaboration with retail partners, finds McKinsey, forming “power partnerships” that yield meaningful growth in revenue and profit for both stakeholders.
Dov Tannenbaum, a principle at Leo Schachter Diamonds, referenced McKinsey in a recent Plumb Club podcast on the power of partnerships between retailers and manufacturers. “We have found in our experiences that when retailers and manufacturers work together and share insights it can go a long way in developing new activities that can deliver compelling, innovative offerings.”
As an example, Tannenbaum cites the shared use of an assets library, including photography, videos, illustrations, and copy that can be used in store, online, digitally, or on social media. “Setting up shared drives with asset files that are updated on a regular basis and can be accessed directly by the retailer, is an added value that provides time and cost savings for both parties.”
Planning social and digital activities together expands reach and frequency for both stakeholders. “Working together makes it possible to develop more promotional vehicles, enhance in store and training support, and create unique value-added offerings,” Tannenbaum says. “Evolving to an agile operating model that supports nimble execution at retail is more important than ever.”
Getting Closer to Source
Some of the highest performing power partnerships cover commercial and operational areas. Among them are supply chain improvements, including third party and drop ship capabilities, online inventory and purchasing, last mile delivery, and product customization and services that produce incremental volume and reduced costs for all.
Urmil Gajera, who is involved in every aspect of the supply chain for his company, Aneri Jewels, not only advocates that retailers partner with manufacturers, he shares in a Plumb Club podcast the benefits of shortening the supply chain and working with responsible suppliers close to the source.
Price is one of the benefits a shorter supply chain yields. When retailers seek out a shorter supply strategy, Gajera says it’s a win-win for both parties. “Having a shorter supply chain strategy increases a retailer’s potential margin, giving them the ability to be price sensitive and price elastic when needed.”
But Gajera says it’s more than just price in removing many layers of supply chain middlemen. “It’s about maintaining credibility, quality and ensuring a good reputation. Consumers today look for jewelry brands and stores that have strong beliefs and practices of responsible sourcing.” He points out that all Plumb Club members are members of the Responsible Jewlery Council underscoring the benefits that brings in ensuring responsible sourcing and best business practices.
Collaborating with manufacturers has many benefits for retailers, advocates Tannenbaum, including the ability to tap into market data and analytics; to be among the first exposed to innovation opportunities; to collaborate to improve the value chain for all; to develop effective retailer training that drives loyalty, advocacy and purchase; and to build product and branded social channels and websites to move consumers through their journey to retail sites and stores.
With consumers’ behavior changing to purchase products online, it helps to choose jewelry manufacturers that can provide drop ship services, says Gajera, who notes that it’s convenient for manufacturers, as they are making jewelry for confirmed orders. “That creates efficiency, thus lowering the overhead costs of holding inventory. Quality, price and flow are all consistent when working with a manufacturer closer to the source.”
Retailers have incredible information about their customers and the experiences in store, which also should be shared and leveraged in the relationship. “We recommend that both sides build consumer research,” says Tannenbaum. Product usage testing, online focus groups, and one-on-one interviews are among the ways supplier-retail partnerships can generate insights and analytics to support goals, new products and activities.
Tannenbaum advocates that manufacturer and retailer should understand each other’s medium to long-term goals. “Both sides, in time should be willing to share their three-to-five-year strategic plans and together align their goals through building a joint long-term vision.”
Leo Schachter discovered that it was more effective for the manufacturer to participate in existing retailer cross-functional meetings and teams than try to create new ones that just added more meetings and time to everyone’s schedule.
“We reached out to our partners to get a better understanding of how we could become participants in existing team meetings during the allotted time our brand and products were being discussed,” Tannenbaum shares. “It led to creating added value for both of us by being a part of their process and receiving valuable input from both internal and external team members.
Retailers should select vendor partners based on capabilities, strategic goals, and value potential; Tannenbaum advises. “Many aim to collaborate with the largest manufacturers and suppliers, but the largest may not be the best choice for you. Assess potential partners by evaluating if there is potential value for both of you; ascertain if both parties have sufficient common strategic interests; understand if the manufacturer has infrastructure and processes in place to provide a strong foundation for your collaboration.”
The potential value of these power partnerships is tremendous, with the ultimate goal of creating new revenue and profit growth and sustained competitive advantage for both stakeholders committed to the relationship.