How to be successful in business selling to retail

I’ve spent a lot of my business life working in and around consumer goods companies.  Now, the FMCG world is an interesting place, dominated by the uneasy relationships between the big retailers and the smaller suppliers.

Over recent years the situation has become even more polarised, with the retail giants taking and even more dominant place on our high-street, as this table shows:

1960 – Independents 60% / Supermarket 20% / Co-ops 20%

1980 – Independents 20% / Supermarket 60% / Co-ops 20%

2000 – Independents 08% / Supermarket 85% / Co-ops 07%

2010 – Independents 05% / Supermarket 90% / Co-ops 05%

In contrast to this (and putting aside the giants such as unilever) the business landscape on the supplier side has been moving towards ever smaller firms.  With barriers to entry falling, more and more budding entrepreneurs are starting their own product companies.

However, these start-ups quickly find that working with retail can be a logistical and financial challenge as the retailer’s methods are designed to extract the maximum profit for themselves, whilst passing all the risk back to their suppliers.  In terms of working capital, the game is so one-sided that some retailers have become banks yet the suppliers have to resort to accounts receivable factoring.