How to negotiate with large retailers

Imagine: you arrive at a meeting with a purchasing group. As you sit down, you discover your chair is broken. Yet, the buyer acts like nothing is wrong, and the discussion begins: you're in for two hours of torture! Does this anecdote seem unbelievable to you? Yet, it’s one of the legends surrounding negotiations... those who have experienced it will believe it, others will doubt it!

But what is the situation today?

Sidely looks into the commercial negotiations between suppliers and retail brands in the mass distribution sector. We will start by describing the negotiation calendar, then propose a way to prepare, and finally we will list a set of techniques for managing negotiation interviews (from the seller's side, of course!).

‍But let’s start at the beginning: what are the major stages preceding the sending of general terms and conditions of sale to the chains?

Negotiation calendar in mass retail

The signing of distribution contracts is the conclusion of sales cycles that follow certain steps. Here is what the calendar of business relations between brands and distributors typically looks like.

July / August: preparation of offers

In anticipation of annual negotiations, manufacturers work on their strategy (assortment, pricing strategy, etc.). For brands that are already listed, it is important for category managers to use this period to report all the signals they capture in the field, in order to decipher the listing strategy that each chain will deploy six months later. Beyond anticipating distributors' plans, brands must also assess their performances as well as the strategies of their peers to arrive armed with the right performance indicators at the negotiation phase.

September: announcement effects

The banners start communicating publicly about their strategies, especially during the LSA Commercial Negotiations Congress. This is the moment to note the gap between the information you have and the official discourse. Adjust your strategies based on what you learn.

October: sending the first proposals

By late October, the time is often right for small and medium-sized enterprises to send in their pricing proposals. Validations can happen quite quickly when your offer aligns with the distributor's listing strategy and you agree to the terms they "propose."

‍Discover in this article, how mass retail sets prices.

November: submission of offers

For national brands or companies with broad assortments, the deadlines are generally longer. Indeed, banners allow themselves time to adjust their strategy based on what emerges from commercial discussions. But, by late November, they insist on having all proposals in hand in order to launch the negotiation meeting sequence (up to 4 or even 5 meetings in some cases!).

December - January: commercial negotiations

There are then a few weeks left to discuss the terms of the distribution contract during in-person meetings. For the year 2024, the Bruno Le Maire Law moved up the deadlines, separating suppliers into two groups based on their turnover (see table below). Previously, the deadline was closer to late February. It is therefore advisable to wait a bit to see the impact of this change and what will apply in 2025. 

However, we can see that up to now, the government does not contradict the practice of banners focusing on finalizing contracts with SMEs first, then negotiating with large companies, a point that is far from being unanimously supported by suppliers in the supermarket sector!

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Understanding the brand's strategy and adapting your proposal

It is difficult for brands to guess in advance the distribution strategies that networks will adopt. Yet this is a crucial point because, regardless of the quality of your offer, it will only be approved if it meets the commercial objectives set by your distributors.

Therefore, you must try to anticipate the strategic objectives of each of your distributors: 

• How the chain wishes to position itself against its peers (low prices, organic, sustainability, quality, local, diversity, niche, exclusivity, etc.); 

• Breadth and depth of mandatory and optional assortments, including the logic of strata;

• Developments in private labels, etc.

It is also essential to know the main financial performance indicators that will define the purchase quality for your interlocutor: turnover, unit margin, or margin mass.

By analyzing your distributor's financial objectives, you can build tailored assortments and pricing structures, with tiered offers if necessary. In general, the buyer will always want to drive prices down, while you want to increase the mandatory assortment. These objectives can lead to a compromise that satisfies everyone: you on the range width, the distributor on the purchase cost. This is known as a range agreement.

Finally, keep in mind that buyers are generally sensitive to the concept of incremental sales—that is, products that will generate new revenue through specific campaigns or an innovation that opens up a new niche.

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Brands' commercial objectives during annual negotiations

If you are starting out in mass retail, you might wonder what are the most crucial points to address in negotiations. We have compiled this short list; it is up to you to evaluate the significance of each item and, why not, rank them in order of importance in your strategy: 

• Shelf presence: number of facings, strategic positioning (e.g., end-caps);

• Promotional highlighting: negotiated operations or in-leaflet highlights, features on the banner's promotional media (catalogs, posters, websites, etc.);

• Competitive prices: use your results in other banners or channels to show your interlocutor that it would be in their interest to limit their profit margin to avoid dampening sales;

• Guaranteed sales volumes: to ensure that your products enjoy good visibility and healthy shelf positioning;

• Merchandising: placement of POS materials and other advertising displays in stores;

• Exclusivity or distribution priority: this can concern certain categories or regions, or a distribution priority over other competing brands;

• Marketing and communication support: assistance from the retail banner in terms of marketing and communication, such as joint advertising campaigns or promotional events;

• Favorable payment terms: for example, extended payment windows or early payment discounts;

• Access to sales data: the famous cash register outputs (or sell-out data), to better understand customer buying behavior and adjust your strategy accordingly.

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Negotiation techniques when dealing with supermarket buyers

Now that you have all the tools in hand to prepare your sales pitch, we can discuss the techniques for managing negotiation meetings with mass retail groups.

1) Practice

If you lack sales experience or are new to mass retail, you are probably far from realizing the difficulties that can arise during a negotiation meeting. Remember one thing: buying is a profession, and your interlocutors are both skilled and experienced. The best advice we can give you is to practice with a stopwatch in hand. You can do this by organizing role-plays where a colleague acts as the buyer!

2) Confirming decision-making power

In their toolkit of techniques, a buyer might lead you to believe they do not hold decision-making power over some or all of the points discussed. If this happens, take a step back and ask technical questions about the buying organization and the hierarchy in their network. Your contact will then give you key elements to leverage as discussions continue, and quite often, they will prove to actually be the decision-maker and won't be able to back out so easily anymore.‍

3) Good cop bad cop

If you are facing 2 decision-makers playing good cop, bad cop to throw you off balance, try to break the dynamic: let them debate among themselves and ask open questions to the bad cop, in order to think things through together and avoid falling into the trap of arguing blindly.

4) Time management

The typical buyer strategy is to make you talk as long as possible, both to wear you down and to compile a complete list of your demands. Once you have "shown your hand," the ordeal begins... The buyer is ready, used to these meetings, and knows that after several hours of discussion, you will be more inclined to yield to their terms. You will therefore need to show patience. Furthermore, never accept a deal without thinking it over first. Just as the buyer will not hesitate to shield themselves behind their hierarchy whenever they want to stall, you can also assert reasons that allow you to take time to reflect.

5) Uncovering the stakes 

It is also common for the buyer to save the final blow for the end of the meeting, or even the moment of the handshake. It is therefore crucial not to slip into a monologue: learn to redirect questions and get the buyer to talk. Try, on your end, to understand as much of their objectives and expectations as possible to adjust your arguments and keep some arrows for the finish line. Before giving a final agreement, look them in the eye and ask if everything is indeed on the table.

6) Foot-in-the-door

Often linked to the funnel technique, this highly effective influence method rests on a simple principle: numerous studies have shown that obtaining agreement on a low-cost request (in terms of effort, money, or other resources) vastly increases the chances of securing a second agreement on a higher-cost request. For example, you have a better chance of a friend lending you $100 if they already lent you $10 the week before. It might seem counter-intuitive, but people say yes more easily when they have already said yes before. Use this technique wisely, and be aware that someone might try to use it on you.‍

7) A laundry list of demands

A successful negotiation is when the buyer thinks they got a great deal. To achieve this, they need to feel they've gotten concessions on all points of interest to them. That's why, if there are 3 points you absolutely must get approved, strive to list 10. If the buyer only says yes to 3 out of 10, they will feel they won the game, and you will have obtained what you wanted. Be prepared as well for the buyer to have a miles-long list of demands of their own...

8) Door-in-the-face

Similarly, you can inflate a request, knowing full well that the buyer will say NO (slamming the door in your face!). Following an exchange that you manage to prolong as much as possible, rephrase your proposal, softening the terms to align with your actual goal. This time, the cost of saying yes appears much more acceptable to the buyer!

9) Detachment, the mirror game 

To throw you off, the buyer might feign a sort of indifference: "after all, there are plenty of other suppliers, and besides, this product range isn't what drives people to do their shopping anyway..." Do not fall into the trap of overselling: that is exactly what they are waiting for. Instead, mirror their behavior; this expert posture allows you once again to map out the best strategy together:   "I understand, it’s a complex situation. What is your strategy for this range / this shelf? What would be needed to make sales take off?" etc.

10) Never a concession without a trade-off

A sales must-have! List your demands in order of strategic importance and prepare to show some grit. Your distributors must fight to obtain every concession, and you should not budge unless they are also willing to make an effort in return.

11) Comprehensive understanding

Never validate a point that is not completely clear to you. Have things explained to you as many times as necessary. This is not a sign of foolishness, but on the contrary, of critical thinking. If a buyer sets a condition, it's because it will impact your results. This impact must be fully understood on your side.

12) Managing emotions

Avoid reacting too spontaneously, and if your interlocutor says something that repels you, breathe and relax before speaking again. Also watch out for flattery: it is a highly effective manipulation technique that allows a buyer to make you lower your guard by creating a positive feeling. Our advice: re-read The Crow and the Fox an hour before the meeting, and swear you won't be fooled!

13) Bring your own figures

Be prepared for your interlocutors to confront you with figures that play against you (decline of your market, arrival of competing offers, low results at certain points of sale, etc.). Anticipate this situation and bring your own analyses (strong performance in a competitor chain, product of the future, growth of your turnover, etc.).

Of course, it is impossible to anticipate every scenario that will present itself during your meetings. The techniques listed above are thus intended to prepare you, but feel free to adapt them to specific situations.

And if all goes well and you secure the deal you dreamed of?

Well, it doesn't stop there, because you'll then need to defend your shelf space by ensuring your products are properly highlighted on supermarket shelves. And for that, there is the Sidely application!