Why Are Vendors Still Running The Show?

After 30 years in this business I am still amazed how retail can literally be screwed by their suppliers.  I am not saying it is a lack of knowledge, a lack of systems or perhaps just a lack of scale or all of the above.  I thought the old days were over where it was every person for themselves but a recent assignment changed all that.  I am currently working in a very fragmented retail market.  Geographic obstacles as well as a lack of merger and acquisition consolidation has prevented the outlets in this trade area from reaping the supply chain advantages that most larger chains or chains with better density already enjoy.  This particular chain is a start up and does suffer from the all of the above scenario but in examining other chains in the area for a possibility of an acquisition or a roll up, most are years behind in inventory control, cash management and supply chain tightening.  An “independent” culture seems to reign here, usually the result of an entrepreneurial founder that has passed down the business to second or third generation private owners.  While in some cases, such as wholesale and supply, those markets can withstand competition due to high cost of entry, retail is no such animal.  Where there is dirt, a competitor can come in and if there isn’t enough dirt, cash or leverage can accomplish the same effect. Porter’s Five Forces still have credence in our economy and is very relevant in fragmented markets such as this.  Once the geographic barriers provided insurance but with information going global and price inefficiencies being exposed quicker, competition is quicker to respond.  To the good, the company I am working with is making a commitment to install IT systems that will provide them with good data.  To the down side, numbers are just numbers unless you have the human infrastructure to interpret and act on the numbers.  This variable cost as opposed to the fixed cost of the IT purchase is what they still balk from and what could be their undoing in the future.  Even armed with numbers, what is the guarantee that suppliers will provide better costs and services?  None unless there is a larger threat to their survival.  National pressure from parent company?  Very unlikely.  Unified front from retailer market through co-op, buyer groups or brokers?  Have not seen it yet.  Not only are we trying to leap into the future, we are trying to break years of ingrained behavior established by what worked in the past.  Yes, there are some young Turks or nationally controlled chains that are taking advantage of this inequality.  Dollar General is making impressive gains in this market as is McDonalds.  Does anybody see the writing on the wall yet?  If they have, they have not reacted.  Maybe we need to model Nebuchadnezzar and find our Daniel to interpret.  Even so, that is no guarantee to action.  Only when we can truly show a win-win for both supplier and retailer and actually have both parties believe in it will change ever occur.  In personal life and professional life….