Advertising Age reports that Target is hardening its negotiating stance in its dealings with manufacturers as it “expands its private-label brands to improve margins and undertakes the daunting challenge of expanding the food section at most of its 1,418 stores.
“Suppliers of both large and small brands said Target has demanded unprecedented price concessions during the past year, in addition to beefing up what some call an uncompromising strong-arm tactic not even seen in Bentonville: an online reverse auction buying system considered by some suppliers as a margin-busting, no-win option for them.”
This trend is taking place, according to Ad Age, as Wal-Mart tries to improve its marketing and design functions and become more collaborative with suppliers.
The reverse auctions, Ad Age writes, “tip the scale in favor of private-label manufacturers ahead of branded manufacturers by forcing suppliers to blindly bid on price alone. Additionally, the retailer’s so-dubbed category captains within its buying division today not only want data on product and shipments, but also are making endless data requests suppliers fear will be used against their own brand when the chain launches its next premium-priced house brand.”
Target responded to the Ad Age allegations by saying that while its processes are hard for some suppliers to get used to, it has gotten positive feedback from a number of manufacturers.
“Suppliers of both large and small brands said Target has demanded unprecedented price concessions during the past year, in addition to beefing up what some call an uncompromising strong-arm tactic not even seen in Bentonville: an online reverse auction buying system considered by some suppliers as a margin-busting, no-win option for them.”
This trend is taking place, according to Ad Age, as Wal-Mart tries to improve its marketing and design functions and become more collaborative with suppliers.
The reverse auctions, Ad Age writes, “tip the scale in favor of private-label manufacturers ahead of branded manufacturers by forcing suppliers to blindly bid on price alone. Additionally, the retailer’s so-dubbed category captains within its buying division today not only want data on product and shipments, but also are making endless data requests suppliers fear will be used against their own brand when the chain launches its next premium-priced house brand.”
Target responded to the Ad Age allegations by saying that while its processes are hard for some suppliers to get used to, it has gotten positive feedback from a number of manufacturers.
- KC's View:
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We can only wonder what the reaction in Bentonville has been to the charge that its buying divisions are getting soft.
This story suggests that the pitched battle between Target and Wal-Mart can only get bloodier – that as Wal-Mart tries to poach Target’s cheap chic approach, Target will be trying to get tougher and sharper on price.
The people who we really feel sorry for are the ones in the middle, who don’t have the marketing muscle to be really competitive in these areas. It ratchets up the pressure on these mainstream companies to find new and innovative ways to differentiate themselves.
It isn’t for the faint of heart.
