Imagine: you arrive for an appointment with a central purchasing office. As you sit down, you discover that your chair is broken. However, the buyer pretends not to care, and the discussion begins: two hours of agony are in store! Does this anecdote seem incredible? It's one of the many legends surrounding negotiations... those who have experienced it will believe it, those who haven't will doubt it!
But what about today?
Sidely takes a look at commercial negotiations between suppliers and retailers. We'll start by describing the timetable for negotiations, then suggest a way to prepare, and finally list a series of techniques for managing negotiation meetings (on the sales side, of course!).
But let's start at the beginning: what are the main stages involved in sending general terms and conditions of sale to retailers?
The signing of distribution contracts is the conclusion of sales cycles that follow certain stages. Here's what the timetable for commercial relations between brands and distributors generally looks like.
In the run-up to annual negotiations, manufacturers work on their strategy(assortment, pricing strategy, etc.). For brands that are already referenced, it is important that sector managers use this period to feed back all the signals they pick up in the field, with a view to deciphering the referencing strategy that each retailer will deploy six months later. In addition to anticipating distributors' plans, brands also need to assess their own performance, as well as the strategies of their peers, so as to arrive armed with the right performance indicators for the negotiation phase.
Retailers are beginning to communicate publicly on their strategies, notably at the LSA Trade Negotiations Congress. Now is the time to see the gap between the information you have and the official discourse. Adjust your strategies according to what you learn.
At the end of October, it's often time for small and medium-sized companies to send in their price proposals. Validations can come fairly quickly when your offer matches the distributor's listing strategy and you agree to the terms he "proposes".
For national brands or companies with large assortments, lead times are generally longer. This is because retailers allow themselves time to adjust their strategy according to what emerges from the commercial discussions. However, by the end of November, they are keen to have all the proposals in hand, so as to launch the sequence of negotiation meetings (up to 4 or even 5 meetings in some cases!).
There are still a few weeks to discuss the terms of the distribution contract at face-to-face meetings. For the year 2024, the Bruno Le Maire Law has brought forward the deadlines, distinguishing two groups of suppliers according to their sales (see table below). Previously, the deadline was the end of February. We'll have to wait a little longer to find out the impact of this change, and what will apply in 2025.
So far, however, the government has not contradicted retailers' practice of giving priority to formalizing agreements with SMEs, then negotiating with large companies, a point that is far from unanimously supported by supermarket suppliers!
It's difficult for brands to anticipate the distribution strategies that retailers will adopt. Yet this is a crucial point, because no matter how good your offer is, it will only be validated if it meets the commercial objectives set by your distributors.
You must therefore try to anticipate the strategic objectives of each of your distributors:
It's also essential to know the main financial performance indicators that will define the quality of the purchase for your contact: sales, unit margin or mass margin.
By analyzing your distributor's financial objectives, you can build up suitable assortments and pricings, with - if necessary - drawer offers. In general, the buyer will always want to lower prices, while you want to increase the mandatory assortment. These objectives can lead to a compromise that satisfies everyone: you on range breadth, the distributor on purchasing cost. This is known as a range agreement.
Finally, buyers are generally sensitive to the notion of incremental sales, i.e. products that will generate new sales through specific campaigns or an innovation that opens up a new niche.
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If you're just starting out in the retail business, you may be wondering which are the most crucial points to address in negotiations. We've put together this short list for you to assess the importance of each item and - why not? - rank them in order of importance to your strategy:
Now that you've got everything you need to prepare your sales proposal, we can move on to the techniques for managing negotiations with supermarket chains.
If you lack sales experience or are just starting out in the retail sector, you're probably unaware of the difficulties that can arise during a negotiation meeting. Remember one thing: buying is a profession, and the people you'll be dealing with are both skilled and experienced. The best advice we can give you is to practice, stopwatch in hand. You can organize role-playing sessions in which a colleague puts himself in the buyer's shoes!
In his panoply of techniques, the buyer may lead you to believe that he is not the decision-maker on all or part of the points discussed. If this is the case, take a step back and ask technical questions about the purchasing organization and hierarchy within the network. Your contact will then give you valuable information on which to base further discussions, and will often turn out to be a decision-maker in the end, unable to evade the issue so easily.
If you're faced with 2 interlocutors who are playing good cop/bad cop to throw you off balance, try to break the relational game that's being set up: let them debate amongst themselves and ask open-ended questions of the bad cop, so that they can think together and avoid falling into the trap of blind argumentation.
Buyers' strategy is generally to keep you talking for as long as possible, in order to tire you out on the one hand, but also to be able to list all your demands. Once you've "shown your hand", the torture begins... The buyer is ready, he's used to these talks, and he knows that after several hours of discussion, you'll be more inclined to bend to his conditions. So you'll need to be patient. And never agree to a deal without thinking it through first. Just as the buyer won't hesitate to hide behind his hierarchy every time he wants to stall, you can also invoke reasons that allow you to take time to think things over.
It's quite common for the buyer to save the coup de grâce for the end of the interview, or even the moment of the handshake. That's why it's vital not to start a monologue: learn to turn the questions around and get the buyer talking. Try to understand the buyer's objectives and expectations as fully as possible, so that you can adjust your arguments and save some arrows for the end. Before giving your final agreement, look the buyer in the eye and ask if everything has been put on the table.
Often associated with the funnel, this highly effective influence technique is based on a simple principle: numerous studies have shown that getting agreement on a low-cost request (in effort, money or other terms) considerably increases the chances of getting a second agreement on a more expensive request. For example, you're more likely to get a friend to lend you 100 EUR if they've already lent you 10 EUR the week before. It may seem counter-intuitive, but it's easier to say yes when you've said yes before. Use this technique wisely, and be aware that someone may try to use it on you.
A successful negotiation is one in which the buyer feels he has made a bargain. To achieve this, they need to feel they've got something in return on all the points they're interested in. That's why, if there are 3 points on which you absolutely want validation, try to list 10. If the buyer only says yes 3 to 10, he'll feel he's won the game, and you'll have got what you wanted. And be prepared for the buyer to have a list of requests as long as his arm...
In the same way, you can over-dimension a request, knowing full well that the buyer will say NO (he'll shut the door in your face!). At the end of an exchange that you know will last as long as possible, reformulate your proposal, lightening the terms to make them correspond to your real objective. This time, the cost of saying yes seems much more acceptable to the buyer!
In order to destabilize you, the buyer may feign a form of detachment: "after all, there are other suppliers out there, and this product range isn't what motivates people to shop, either". Don't fall into the trap of overselling: that's exactly what he expects. On the contrary, imitate his behavior; this expert position enables you once again to work out the best strategy together: : "I understand, it's a complex situation. What is your strategy for this range/shelf? What would it take to get sales off the ground?" etc.
A must-have sales tool! List your demands in order of strategic importance and be prepared to be pugnacious. Your distributors have to fight for every concession, and you won't listen until they're ready to make an effort in return.
Never validate a point that isn't totally clear to you. Have things explained to you as many times as necessary. This is not a sign of stupidity, but of critical thinking. If a buyer sets a condition, it's because it will have an impact on your results. This impact must be perfectly understood on your side.
Avoid reacting too spontaneously, and if the other person says something that revolts you, breathe and relax before speaking again. Beware, too, of flattery: it's a powerful manipulative technique that allows the buyer to make you lower your guard by creating a positive feeling in you. Our advice: reread The Raven and the Fox an hour before your appointment, and swear you won't get caught!
Be prepared for your contacts to confront you with figures that work against you (decline in your market, emergence of competing offers, poor results at certain points of sale, etc.). Anticipate this situation and provide your own analysis (strong performance by a competitor, product with a future, sales growth, etc.).
Of course, it's impossible to anticipate every situation that will arise during your appointments. The techniques outlined above are therefore intended to prepare you, but you are free to adapt them to specific situations.
And if all goes well and you get that deal you've been dreaming about?
Well, it doesn't stop there, because you're going to have to defend your share of shelf space by making sure your products are properly promoted on supermarket shelves. And for that, there's the Sidely app!
