Retailers and brand power

Retailers play a critical role linking suppliers and consumers in the consumer-packaged goods (CPG) sector. How a retailer uses brand power impacts their negotiating approach, assortment decisions and their go to market strategy. 

This article investigates how retailers can leverage brand power to gain customers, improve their market share and increase their sales and profitability. This knowledge and implementation of advisement are a core part of The Gap Partnership’s consulting and training services.

Building brand power

Carrying well-known brands is proven to drive customer count, positively impact sales and in the end, customer loyalty to the retailer. This often is an advantage in today’s saturated and competitive retail landscape.

• Attracting customers: Strong brands drive loyal customers to find their products at the best prices. Retailers who carry these brands impact where the consumers choose to shop, increasing overall foot traffic and the retailer's total sales and market share.
• Enhancing reputation: Carrying national brands improves the market standing of the retailer.  High-quality brands are associated with the general dependability and quality of the store by consumers. This positive association can help the retailer to build long-term consumer loyalty and strengthen reputation.
• Driving sales: Retailers can maximize their sales potential by carefully positioning their supplier brands in key areas and helping them with focused promotions. These brands often come with great pricing and high volumes to deliver the margin dollars need for further growth.

Negotiation dynamics

Retailers often use the combination of brand strength and their distribution to negotiate better terms with suppliers. By coming to an agreement, both parties can find alignment in pricing, marketing support and strategic alliances. The goal is to secure agreeable terms that are favorable to both sides.

• Competitive pricing: Retailers work with suppliers to negotiate pricing agreements. They have the difficult balance of competitive prices to deliver value to their consumers while protecting margin and profitability.
• Promotional support: Retailers negotiate for supplier promotional dollars to increase sales and draw customers. This can cover discounts, co-branded campaigns, in-store promotions or special category bargains. Working with suppliers improves brand awareness, generates foot traffic and boosts sales, therefore benefiting both sides from more customer interaction.
• Strategic capabilities: Retailers often lean on their suppliers’ expertise, their knowledge of shopper marketing, category management, data-driven insights and occasionally their production capability to create value. Suppliers assist in creating targeted promotions, optimizing product assortments and providing consumer behavior data, helping retailers drive sales and improve performance without needing to develop these capabilities in-house.

Case study: Costco

Consider Costco, well-known for offering some of the best prices around on many of of the most well-known national brands. By leaning on its significant buying power, Costco not only guarantees appealing prices for its consumers but also uses this influence to collaborate with its key suppliers in building its own in-house brand, Kirkland Signature.

• Attracting customers: Costco stocks a wide range of well-known brands, from premium labels to trusted household names. This diverse brand portfolio, combined with the retailer’s competitive pricing, draws a wide variety of customers. The presence of these recognizable brands builds trust with customers, making Costco a go-to destination for high-quality products at a lower cost.
• Exclusive products and pack sizes: As a bulk retailer, Costco differentiates itself by offering products in unique pack sizes and configurations not found at other mass retailers or grocery stores. Costco negotiates with suppliers to create exclusive products tailored specifically for its members, ensuring they receive added value through larger quantities or specially packaged items. This strategy not only enhances Costco’s appeal but also gives suppliers an opportunity to reach customers in a distinctive, high-volume format that encourages repeat purchases and customer loyalty.
• Developing private label: Costco offers a limited selection of brands, usually just one or two per category, but in large volumes, making it a coveted distribution channel for national brands. To gain shelf space, Costco often requires these brands to help develop Kirkland Signature products. This partnership ensures Kirkland products meet high standards, giving Costco the ability to offer premium-quality alternatives at lower prices, while also reinforcing Kirkland as a trusted, competitive brand.

Key takeaways

• Turn distribution into influence: Use your distribution network and consumer reach to negotiate favorable terms with suppliers. This could include exclusive product launches, co-branding opportunities, joint marketing campaigns that enhance mutual visibility.
• Enhance supplier collaboration: Negotiate for more than just price—work with suppliers to co-develop new offerings tailored to your customer base, like Costco’s exclusive pack sizes or Kirkland collaborations. This not only strengthens relationships but also ensures products align with your unique value proposition.
• Leverage consumer trust: Demonstrate how your reputation and customer loyalty can amplify supplier brand visibility and drive sales, while leveraging that intangible value to trade for more favorable terms in your negotiations.

Conclusion

Retailers play a critical role in leveraging the power of brand partnerships to create unique value propositions for both consumers and suppliers. By leveraging consumer trust and market influence to collaborate with their suppliers, retailers can strengthen their negotiating power. Consider how your own business can leverage these principles to maximize future supplier negotiations and take full advantage of the brand power available to you.

Want to dive deeper into the realm of brand power?

As we continue to explore the dynamics of brand power and pricing, the next article will focus on the consumer perspective. Although they do not directly have a seat, understanding how consumers impact the negotiating table is paramount to finding success.

More reading and listening

Tariff-proof strategies: Elevating CPG negotiations article by James Kennerdale, Regional Commercial Lead, The Gap Partnership and Mike Kamins, Partner, The Gap Partnership

Chris Prahler | Inside my head podcast hosted by Michael Perlish, Principal, The Gap Partnership, featuring Chris Prahler, Vice President Global procurement & CPO, a seasoned professional with a 25-year journey spanning from Target to Chewy and Lowe’s

Buying alliances: Coming to a market near you article by Chris Atkins, Partner, The Gap Partnership

Inflation: It’s all in the words article by Scott Chepow, Partner, The Gap Partnership

About the author

Nick Capuano is a Manager at The Gap Partnership, with over a decade of expertise in business development, account management and strategic leadership. As National Business Development Manager and National Account Sales Manager at PepsiCo, Nick spearheaded new business initiatives and secured high-impact deals with industry giants like Papa John's and Dairy Queen. Nick consistently delivers exceptional results and fosters a culture of excellence, driving transformative growth for his clients.

Chris Potestio, Senior Consultant at The Gap Partnership, has over 20 years of experience in Corporate Grocery, Wine & Spirits and Consulting. He previously managed $1B+ in sales at Southeastern Grocers, expanded global suppliers at Stew Leonard and oversaw an EBITDA growth of between $1M and $100M across other projects. Chris has received industry recognition, including the HEB Merchant of the Year and a Retail Innovator awards for his strategic and operational contributions. 

About The Gap Partnership

The Gap Partnership is a management consultancy specializing in negotiation. We help organizations drive profitability, increase efficiency and reduce cost. 

We provide development programs and negotiation training to our clients. We work with you to understand your challenges and performance needs. Our negotiation consultants come from your industry and will support you with a 'complete' solution that embeds learning, measures capability and delivers sustainable change.We hold ourselves accountable for your success. 70% of our business comes from clients we have worked with for over five years. 

If you require further information on how we can help you and your teams make the most of every negotiation, or simply need to ask us a question - just call, email or complete the form.