Skip to content
Product cover

Rebuilding the Relationship Between Manufacturers and Retailers

December 18, 2012 | Niraj Dawar , Jason Stornelli | Strategy

In the perennial tug of war between manufacturers and retailers, retailers seem to be winning. Today’s retail industry is more concentrated than ever "Ò in many industries and markets, a handful of retailers account for a majority of the sales. Their ability to control market access and influence consumer buying behavior means that manufacturers need retailers more than ever. And just imperatively, the authors argue, they need to understand what makes retailers tick.

As retailer influence has grown, they note, power has moved downstream. For example, Wal-Mart’s sale are approximately 4.5 times greater than those of its largest supplier, Procter & ; Gamble. Consolidation and the global scale of retailers have reduced the number of “buying points” that manufacturers can develop.

Yet neither side is satisfied with the current system. Many retailers have difficulty converting trade promotion into profits. Rather than building longer-term partnerships with suppliers and nurturing store and shopper loyalty, retailers tend to compete on price and fritter away the trade support they extract from manufacturers.

What can be done to improve the situation? While manufacturers are locked into large fixed investments and wedded to products and brands with long payback cycles, retailers have a variety of ways of making money. The particular approach, or the mixture of approaches, that a retailer selects defines the retailer’s business model and how it differs from competitors.

The article highlights four different retail business models, as exemplified by Tesco, which connects with consumers through its loyalty program; Loblaw, which relies heavily on private labels; Costco, which gets its suppliers to finance its inventory; and Wal-Mart, which focuses closely on margins.

Purchase Options

Educator and Student Discounts Available. Learn more »

  BENCHMARKS  
Loading Time: Base Classes  0.0008
My Controller Construct  0.0003
Build Nav  0.0006
Controller Execution Time ( Products / Route )  0.0796
Total Execution Time  0.0805
  GET DATA  
No GET data exists
  MEMORY USAGE  
1.5592 MB
  POST DATA  
No POST data exists
  URI STRING  
store/rebuilding-the-relationship-between-manufacturers-and-retailers
  CLASS/METHOD  
products/route
  DATABASE:  MITSLOAN_DEV   QUERIES: 68  (Hide)
0.0003  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0003  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0002  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0001  

SELECT *
FROM (`carts`)
WHERE `cart_id` =  'eff450a8807c61f6faa584630a83c592'
ORDER BY `created_at` DESC 
0.0002  

SELECT SQL_CALC_FOUND_ROWS cat_id
FROM (`product_categories`)
WHERE `status_id` =  'A'
AND `url_friendly` =  'rebuilding-the-relationship-between-manufacturers-and-retailers'
AND `parent_id` =  1 
0.0019  

SELECT c.parent_id, c.format_id
                    FROM products AS p, products AS c
                    WHERE p.prod_id = c.parent_id AND
                        c.avail_id IN ('A','B','D') AND
                        c.type_id = 'V' AND
                        (
                            c.sku = 'rebuilding-the-relationship-between-manufacturers-and-retailers' OR
                            if(c.format_id = 'Certificate', '', p.url_friendly) = 'rebuilding-the-relationship-between-manufacturers-and-retailers'
                        )
                    LIMIT 1 
0.0002  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  469 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '469' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '469'
ORDER BY `sort` ASC 
0.0001  

SELECT `cat_id`
FROM (`product_categories__products`)
WHERE `prod_id` =  '469' 
0.0001  

SELECT *
FROM (`product_flags__products`)
WHERE `prod_id` =  '469' 
0.0001  

SELECT `sku`
FROM (`products__xsell`)
WHERE `prod_id` =  '469'
ORDER BY IF(position = 0, 1, 0) ASC , `position` 
0.0544  

SELECT `products`.`parent_id`
FROM (`transaction_lines`)
JOIN `products` ON `products`.`sku` = `transaction_lines`.`sku`
JOIN `product_categories__products` ON `products`.`parent_id` = `product_categories__products`.`prod_id`
WHERE `products`.`avail_id` =  'A'
AND TO_DAYS(transaction_lines.updated_at) < (TO_DAYS(NOW()) - 90)
AND `product_categories__products`.`cat_id` IN ('249') 
GROUP BY `products`.`parent_id`
ORDER BY COUNT(*) DESC
LIMIT 6 
0.0008  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '361' 
0.0008  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '361' 
0.0003  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '361'
ORDER BY `sort` ASC 
0.0001  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '3961' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '3961' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '3961'
ORDER BY `sort` ASC 
0.0002  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '35' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '35' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '35'
ORDER BY `sort` ASC 
0.0001  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '179' 
0.0001  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '179' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '179'
ORDER BY `sort` ASC 
0.0001  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '489' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '489' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '489'
ORDER BY `sort` ASC 
0.0001  

SELECT `parent_id`
FROM (`products`)
WHERE `prod_id` =  '2465' 
0.0002  

SELECT *
FROM (`products`)
WHERE `products`.`prod_id` =  '2465' 
0.0002  

SELECT *
FROM (`authors`)
JOIN `products__authors` ON `authors`.`author_id` = `products__authors`.`author_id`
WHERE `products__authors`.`prod_id` =  '2465'
ORDER BY `sort` ASC 
0.0003  

SELECT SQL_CALC_FOUND_ROWS media_id, position
FROM (`media`)
WHERE `foreign_key_table` =  'products'
AND `foreign_key_column` =  'prod_id'
AND `foreign_key_value` =  '469'
AND `kind` =  'image_600x600'
ORDER BY IF(position = 0, 1, 0) ASC , `position` 
0.0001  

SELECT *
FROM (`media`)
WHERE `media`.`media_id` =  '235' 
0.0001  

SELECT *
FROM (`mime_types`)
WHERE `mime_types`.`extension` =  'jpg' 
0.0001  

SELECT *
FROM (`media_metadata`)
WHERE `media_id` =  '235' 
0.0003  

SELECT SQL_CALC_FOUND_ROWS media_id, position
FROM (`media`)
WHERE `foreign_key_table` =  'products'
AND `foreign_key_column` =  'prod_id'
AND `foreign_key_value` =  '469'
AND `kind` =  'gallery_image'
ORDER BY IF(position = 0, 1, 0) ASC , `position` 
0.0004  

SELECT *
FROM (`products`)
WHERE `avail_id` IN ('A', 'B', 'C', 'H') 
AND `parent_id` =  '469'
AND `type_id` =  'V'
ORDER BY IF(position = 0, 1, 0) ASC , `position`, `title` 
0.0001  

SELECT `c`.`format_id`, `c`.`price`, `c`.`sale_price`
FROM (`products` AS c)
WHERE `c`.`prod_id` =  '470'
LIMIT 1 
0.0002  

SELECT SQL_CALC_FOUND_ROWS media_id, position
FROM (`media`)
WHERE `foreign_key_table` =  'products'
AND `foreign_key_column` =  'prod_id'
AND `foreign_key_value` =  '470'
AND `kind` =  'thumbnail'
ORDER BY IF(position = 0, 1, 0) ASC , `position` 
0.0002  

SELECT `product_categories__products`.`cat_id`
FROM (`product_categories__products`)
JOIN `product_categories` ON `product_categories__products`.`cat_id` = `product_categories`.`cat_id`
WHERE `product_categories__products`.`prod_id` =  '469'
AND `product_categories`.`parent_id` =  1
AND `product_categories__products`.`cat_id` NOT IN (1, 261)  
0.0004  

SELECT `cat_id` AS id, `parent_id` AS parent, `status_id`, `name`, `description`, `url_friendly`, `page_title`, `meta_keywords`, `meta_description`, `position`, `updated_at`
FROM (`product_categories`)
WHERE `cat_id` != 1
ORDER BY `parent_id`, IF(position = 0, 1, 0) ASC , `position`, `name` 
0.0003  

SELECT *
FROM (`product_categories`)
WHERE `status_id` =  'A'
AND `parent_id` =  1
AND `cat_id` NOT IN (1, 261) 
ORDER BY `name` 
0.0002  

SELECT *
FROM (`site_settings`)
WHERE `option_key` =  'announcement' 
  HTTP HEADERS  (Show)
  SESSION DATA  (Show)
  CONFIG VARIABLES  (Show)