business news in context, analysis with attitude

MNB fave Glen Terbeek had some thoughts about both Target’s and Amazon’s efforts to get suppliers to offer pricing and logistical support:

Target’s and Amazon’s actions are just more examples of why it won't be much longer until the manufacturers go around the traditional retailers direct to the shoppers they want to target.  The "retail tax" is getting too large in their minds.  Let's face it, a national brand is the same wherever a shopper buys it, compounded by the fact that our saturated markets of real and virtual stores are minimizing the traditional retail values and economics.  And it is obvious that the shoppers are gaining more power and choice.  As an old economics professor said, "You have to create long term value, to make money long term".

The retail tax is not only more and larger discounts, etc, it is also the barriers the retailers create in letting the manufacturers market their brands as they would like.  In addition to asking for more from the manufacturers, these “retail partner customers” are competing directly with the very manufacturers they need with private brands.   I don't see how these trend will change, in fact they will only intensify, under the current retail model that is out of touch with long term market conditions.  Why would manufacturers continue to support and fund their "competing" customers in the future?  I argue they won't be able to afford to much longer!

The future model will connect the shoppers directly with the manufacturers, and visa versa, through a “barrier buster.”  It will eliminate the economic and other barriers that exist in today's outdated retail model.  Don't get me wrong, great retail stores will exist in the future, they will be smaller stores that survive because they create true shopper values above and beyond distribution value and price.  It will be interesting to see which retailers can make the change.

Got a lot of responses to yesterday’s piece about Walmart moving its marketing departments under its merchandising umbrella. In my commentary, I suggested that to my mind, marketing is strategic and merchandising is tactical, and so this move could reflect a philosophical shift by Walmart.

One MNB user wrote:

Walmart’s reorganization, placing marketing underneath it’s merchandising group. Like you, I cannot say whether this is the right strategic move. But it is worth noting that Walmart has always been an organization whose dynamic growth was built on supply-chain logistics, with marketing appearing as something of an afterthought. They failed miserably in their efforts to capture the coveted female shopper’s attention in the case of affordable “designer” fashion brands. Despite huge efforts, they still haven’t managed to craft an aspirational in store experience that can compete with Target.

Another MNB user wrote:

Most companies I deal with have marketing reporting into merchandising- and view it exactly the opposite - the head merchant is the strategist and the marketing arm is the more tactical piece- however- as a system of checks and balances- most company leaders require both to have very strong strategic skills sets- requiring these two areas to come up with both short and long term strategies to drive immediate sales and continue to build the brand.

I believe the thought is that the merchandising arm is more about "selling" - knows what the store needs to look like, what items, what price point, etc. The marketing arm needs to communicate it customers both inside the store - and more importantly outside the store.

That having been said, you can understand why the head of merchandising needs to be a real visionary and thought leader - talent at this level is one of the most difficult to find - sure there are a lot of them out there, but those who can truly understand what needs to be done to drive sales, be a step ahead, create a strategy around it and build/mentor a team that can implement it - very, very hard to find that person. If I were leading WalMart I don't think I would have made the same choices.

From another reader:

Hum , if I were a betting person, my bet would be, soon you will see Mr. Quinn (Walmart’s current marketing chief) leave…   don’t get me wrong, I agree with this move and marketing should be a support division ( and not a very large one at that) and since Mr. Quinn has arrived they have grown in size, and spent a ton on money  and have gotten little if any market share for it.

Another MNB user wrote:

As a former associate in the marketing department (and a cpg veteran of 20+ years), I can agree wholeheartedly with your comments on marketing typically leading strategy.  However, at Walmart, some of the most ambitious (and failed) programs such as Project Impact, Clear Action Alley (yes, they were originally two different programs) as well as sku reduction were all led by Merchandising Executives.  This movement on the org chart is just a "formal" statement of Walmart's leadership priorities in the function areas.

From still another MNB user:

Moving marketing under merchandising is not new.  Before the arrival of the outsiders, Wal-Mart was a merchant driven company with a marketing playing a supporting role.  Now that they have abandoned SKU reduction and their desire to look like Target, an initiative that was driven by people who are now spending more time with their family, it is natural to return to an organizational structure that played a strong part in their past growth.  To me this is a step in the right direction as "Be a Merchant" is part of the culture not "Be a Marketer".
KC's View: