COLORADO SPRINGS, Colo. -- Suppliers need to shed their outdated notions about different classes of trade and consider the end consumer first and foremost, retailers told a gathering of manufacturers here last week.
Jack Flanagan, executive vice president of business systems for Giant Eagle, Pittsburgh, said Giant Eagle is trying to look at what products are relevant to the customer, and urged suppliers to do the same when they come to him with products.
"What I want to know is, what are you doing with Dollar General? What are you doing with Walgreens? Why aren't we seeing some of those programs?" he said during a panel discussion at the Grocery Manufacturers of America's Merchandising, Sales and Marketing conference here last week. "Let's just blow up this notion of channels."
Pointing out that manufacturers are complicit with retailers in ignoring consumers' wants, Flanagan said, "Frankly, want to upchuck if I read one more article" about supermarkets' addiction to vendor spending.
In the case of Costco, a lot of manufacturers just don't show buyers products they think aren't suited to the club channel, said Tim Rose, senior vice president of foods, sundries and fresh foods for the Issaquah, Wash.-based company, who joined Flanagan on the panel.
"I think that assumption has hurt us," Rose said, by keeping Costco from seeing a lot of products over the years. He said that while visiting suppliers, he addresses this problem by making side trips to their employee stores, where he often sees great products he hadn't seen before.
Sales consultant Art Turock of Art Turock & Associates, who moderated the panel, also exhorted manufacturers to offer their insights to retailers to revitalize the Center Store. Such insights can help create distinctive features like Safeway's new Signature Soup bars, he said, which serve customers in a variety of ways by inviting them to buy soup to eat in the store or take home.
Rose, who started his career with Costco in the company's infancy in 1983, described how the club has adopted unconventional practices from the beginning as it sought to differentiate itself from others in the channel.
For two years, employees immersed themselves in the tuna fish production process to see how it could be improved. In the end, Costco came up with a private-label tuna that it priced higher than the leading national brand, he said, and "people were going crazy for it."
Costco's basic membership, at $45 a year, is priced higher than the competition, and out-of-stocks are planned in order to support the treasure-hunt atmosphere. There's no express lane so as to discourage shoppers from dropping in for just a couple of items. "We know that we're not for everybody," Rose said.
"We know we're going to have intelligent loss of sales."
For its part, Giant Eagle has begun measuring and tracking out-of-stocks, addressing slow-moving items that were taking up space needed for fast-movers, said Flanagan, who is in charge of streamlining operations and improving efficiencies at the company. The result was a reduction in out-of-stocks to 1.7% from 5%, and faster recovery time, Flanagan said, a "huge improvement." Other initiatives applied Toyota manufacturing practices to Giant Eagle's in-store bakeries and brought more departments into the decision-making process.
"Fresh eyes means really looking at things through a customer's eyes," Flanagan he said. "We were late getting it, but we get it, and we understand the need to change."