The retail and wholesale distribution industry could save GBP6.1bn (US$10.01bn) a year by agreeing “better” more “mutually beneficial” supplier-buyer deals, new research has claimed.
According to retail consultancy, The Gap Partnership, and independent economists, the Centre for Economic and Business Research, both suppliers and retailers could improve their business performances, productivity and profitability by “thinking creatively” about the terms of contract negotiation.
The research, which the analysts said was based on data from FTSE 250 and Fortune 500 companies, suggested that by realising these savings, the industry could save 90 retailers from insolvency this year, and 230 in 2010.
Retailers have largely responded to the economic downturn by focusing on price, putting pressure on suppliers to slash prices.
However, the researchers claim that if buyers and suppliers scrutinised terms beyond price – looking at risk, payment terms, delivery, distribution and promotions – the FMCG sector could see savings of GBP1.2bn.
“With attention turning from recession to a new ‘r’ word, recovery, the future for the British retail industry rests on retailers and their suppliers taking a clever, collaborative approach to deal-making,” Steve Gates, CEO of The Gap Partnership, said.
“By examining their deals closely across the retail chain, retailers and wholesalers can release significant and timely value. A more collaborative approach will allow retailers to offer their customers quality products at reduced prices. The ultimate winner will be the British consumer.”