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Who has the power?

The balance of power between retailers and manufacturers continues to shift toward retailers, according to most reports. Leonard Lieberman, the statesmanlike president of Supermarkets General Corp., suggests that the two have become substantially equal. Others, perhaps not quite as tactful, are convinced that store operators now definitely have the upper hand.

One explanation for the retailers' growing strength is that scanning gives them significantly better information and analytical capabilities. They, rather than manufacturers, have the latest figures (and therefore the last word) when it comes to item movement, profitability, response to merchandising, and all the other subjects debated by buyers and salesmen.

The manufacturers' position has also been weakened by their constantly expanding use of deals and allowances. Whatever the tactical or competitive justification for this practice, the enormous sums spent for "promotion" are bound to drain off funds that might otherwise be earmarked for consumer advertising. Inasmuch as a solid consumer franchise is the brand marketer's strongest weapon, any diversion of money from franchise-building activities can only be self-defeating.

Deals may well have become a way of life in the industry, as some observers have pointed out. Nevertheless, it seems clear that manufacturers who lessen their hold on consumers will find the living to be increasingly uneasy as the balance of power continues to swing away from them.

Another intriguing power tug-of-war is the intramural contest between store managers and headquarters people. Like the manufacturer-retailer clash, it has been going on for a long time--but again scanning adds a new dimension.

It is now more feasible to move decision-making down to the store level--"where the action is"--because managers have precise information to supplement their instincts about local customers. At the same time, there is no doubt that scanning statistics enable headquarters executives to plan and strategize more effectively. Their ability to evaluate broadscale needs and opportunities is vastly improved. This argues that additional decisions should be made higher in the company hierarchy--"where the accumulated knowledge is."

The issue is not likely to be resolved overnight. But the astute Avram Goldberg, president of The Stop & Shop Cos., believes personnel from the chief officer down to the store manager will be on-line with a lot of the same information "very soon." He predicts, "We will have our own internal developing balance of power, and from that will arise new organizational structures and new ways of making decisions."

A revamped equilibrium obviously is taking shape in our industry, between stores and headquarters as well as between retailers and manufacturers. We can hope that it will stimulate improved efficiency and productivity in the entire system. Meanwhile, we think another balance of power question deserves serious consideration--the supermarket industry's position vs. the array of competitors for a share of the consumer's dollar.

The percent of disposable income spent for food-at-home keeps dropping. It is down to about 11.5%, on average. Though this reflects magnificent performance by grocers, unmatched anywhere in the world, the achievement is generally unappreciated at home.

We are losing ground as an industry, not only to food-away-from-home establishments, but to other fields of retailing. Isn't it time we raised our sights? Nobody ordained that grocers should make do with an ever-shrinking portion of consumer expenditures.

The internal balance of power adjustments will take of themselves, as they always have. In the long run, we think it is more important to marshall all our resources, all our emerging information systems, and all our advertising and merchandising muscle to shore up our defenses against outside competition.

A concerted effort to boost food-at-home outlays to 12%--or maybe more--would produce healthier conditions for all concerned, including consumers.
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Title Annotation:retail grocery trade
Author:Walzer, Edgar B.
Publication:Progressive Grocer
Article Type:editorial
Date:Mar 1, 1984
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