Partnerships between retailers and suppliers are the backbone of the industry, but what happens when they must also be built and maintained digitally during a pandemic? That was the topic of the final panel, “Building Strategic Supplier and Retailer Partnerships,” of the Drug Store News Industry Issues Summit, held virtually in November.
Moderated by Dan Mack of Mack Elevation, the panel of executives from leading retailers was focused on some of the biggest factors of building successful business relationships — innovation, alignment between companies and what the most valuable suppliers bring to the table, as well as how the pandemic changed the process of building partnerships and strong internal teams.
At the outset of the panel, Mack said that only about 1 in 7 suppliers end up being viewed by a retailer as a strategic partner, and that collaboration is the key to unlocking real value from these relationships. “From a supplier perspective, 50% of retailers believe that the biggest block to collaboration is a lack of trust, a lack of clear communication and a lack of data transparency,” he said, noting that often, suppliers believe their products are more differentiated than retailers do, and working together can help accentuate differentiating features of products and drive sales.
A New Kind of Partnership
One of the key things to understand about retailing now, according to Brian Owens, senior vice president of commerce strategy at VMLY&R Commerce, is that retailers are putting customers first, and so must suppliers.
“Everyone is moving to a more shopper-first way of thinking,” he said. “When you think about it, the shopper doesn’t care about walls, brick and mortar; doesn’t care about online; doesn’t care about all the places where retailers start to make money; or where brands make money. They want their needs met.”
Owens said that the evolution of partnerships between retailers and suppliers — and even sometimes competing retailers — to come together and meet consumer needs has been a key change that has taken place over the past year, but it’s something that retail has been well equipped to do. “The DNA of retail is partnership,” he said.
Panelists’ comments highlighted that much of retailers’ work with suppliers throughout the pandemic has been about embracing an uncertain environment in a way that focuses on execution and what they can achieve working in concert.
“Ultimately, the dynamics of this year required a whole new level of visibility, transparency and purpose around our vendor partnerships,” said Dave Semersky, senior divisional - healthcare at Target. “With so many unknowns in the market and the accelerated rate of change, the conversations have needed to evolve to focus on clarity over certainty. This is because we recognize that we can’t predict the future, so we focus on where we can be clear on our perspective, assumptions and future direction.”
As evolving consumer needs led to changing what companies needed to offer, Semersky said that retailers have needed suppliers to shift to a digital-first mindset, in which suppliers are required to drive ease, value and accessibility not just with product, but with content, engagement, digital search and fulfillment. As a result, alignment has become even more important throughout the pandemic, he said, noting that two areas where retailers and suppliers need to be on the same page are around inventory and reliability.
“This is a spot where, if we’re misaligned and we have limited visibility, this impacts the guest and all of the fulfillment options we’ve been working so hard to provide,” he said. “Things may also materialize differently than anticipated, but it’s much easier to adjust and react if we’re all working off the same aligned baseline approach and goal.”
At Walgreens, two big efforts over the past year have been its buildout of its pickup offering — which now allows for contactless pickup at stores across its footprint — and its revamped myWalgreens loyalty program. Mike Wolf, Walgreens’ senior director/DMM for OTC drug, said that both of these undertakings required the chain to partner with suppliers to better understand insights on changing consumer behavior.
“I think we’ve had conversations around how to better get products to shelf and how to streamline production that we’ve never had to have before,” he said. “I think we’ve learned a lot this year as partners, and my hope is we’ll really continue to pull that learning forward and be better partners in the future.”
Innovating in Trying Times
With retailers needing to pivot to new categories and services in order to meet consumers’ desire for safety while also offering an assortment they want to shop, it also has changed how retail executives conceive of innovation.
“The word innovation historically would make me think of something that’s maybe fancy and a tech-enabled product,” said Sherri Keeth, senior director of healthcare strategy and business development at Sam’s Club. “But in this new environment, it really has proven the value of our partners who are able to innovate by just quickly adapting to the needs of the member, whatever way they can.”
She also said that best partners have been ones that have internalized not just their own business objectives, but also those of Sam’s Club and are proactive in suggesting solutions. “Good partners are able to help fill gaps in objectives, but the best ones have been able to understand the retailer’s strategy to the point that they were able to identify threats to achieving their objectives,” she said.
Karen Staniforth, Rite Aid’s senior vice president of clinical and operational pharmacy services, said that increasingly over the past several months, innovation has not meant a new item, necessarily, but meeting needs in a new way — something Rite Aid exemplified by opening COVID-19 testing sites, the process by which getting testing set up across the company’s footprint required bringing on new partners to help facilitate testing, she said.
“If I had said to everybody nine months ago, ‘We’re going to do 50 COVID tests through the drive-thru window of the store every day across the footprint of our stores,’ I think everyone would have said to me, ‘You’re crazy,’” she said. “But just the level of effort that went into this stepping up — and everyone represented here did the same thing in a very short space of time — was very innovative.”
New Approaches, Inside and Out
As retailers worked to strengthen relationships with suppliers under new circumstances, panelists said that getting many of the elements that define successful
business-to-business partnerships also helped build strong internal teams to tackle business objectives.
The same communication and embrace of the unknown that Target’s Semersky outlined was discussed by Jacob Trombino, CVS Health’s DMM for HealthHUB and front-store innovation. As his team was required to quickly roll out necessary products and services — from testing to omnichannel offerings and a 4-ft. face mask section that didn’t exist before — the most important element was communicating with his team so that everyone was on the same page and working toward a single goal.
“As new plans were being developed, we may not have had all the data we normally would have to make a decision, but we didn’t have time to wait,” he said. “We needed to quickly align and be comfortable with being uncomfortable in the decisions we were making, then set expectations with stakeholders on what would and would not work because obviously we couldn’t do everything.”
Staci Cochran, Walmart’s senior director of health and wellness new business development, moved into a new role late last summer and ended up hiring an entire team virtually. She said that the experience taught her the importance of grit and consistency, as well as a concept that is stressed at Walmart — psychological safety. “You want to perform your best at work. You need to feel here in your role if you like, your contributions matter,” she said. “And it’s up to leaders to make sure that your team feels safe, they feel trusted and they feel like they can take risks.”
Sam’s Club’s Keeth said that vulnerability has come to play a necessary part in professional relationships, both within and outside of organizations. “We have to be responsive as a retailer in a way that we haven’t before, and I’m sure that is the same on the supplier side. To some degree, we need a little bit of grace because those changes are happening for our customers and we need to be able to roll with that,” she said, noting that it is important for colleagues to hear each other’s needs and respond to them. “If you are really good as a leader or as a supplier partner, to anticipate the next need is what separates both good leaders and good suppliers in this new environment.”
Eyes on the Future
Mack also asked panelists to consider the future of health and wellness at retail, having them weigh in on potentially big emerging trends in the coming years.
Walmart’s Cochran said that custom-tailored offerings will be critical. “The one word I’ll bring up is personalization: What do you need based on your genetics, based on your lifestyle, etc. What personally helped you find solutions, feel better, be proactive and be well?”
For Staniforth, Rite Aid’s ongoing RxEvolution and its testing has highlighted the value of pharmacists and their role in patient engagement and retention on the front end, which she already has seen as drive-thru testing that has driven more store traffic and even gained new customers. “It’s given us a huge opportunity for future innovation for pharmacy and pharmacy’s role in testing,” she said. “And I think that will have implications on the retail side of the business we start to think more about it.”
VMLY&R Commerce’s Owens said that health and hygiene will continue to be top of mind with consumers, as will an ongoing effort to take health into their own hands. “We’re moving to well care, where a lasting impact of COVID is going to be more of an understanding of themselves in relation to the ones around them,” he said. “You’re also going to see sustainability show up on the shelf, as well as more scrutiny around supply chain and who you’re affiliated with. All these things I think will be happening even faster. And I think every retailer here is positioned to win because of that.”