Remember the trade terms game! 5 rules to help survive the coming price war

With a major grocery retail price war looming, how should supplying organisations protect themselves from the coming carnage? 

Some years ago, an Asda Trading Director, shared a short email with the trading floor entitled "Remember the trade terms game" setting out four simple rules:

Rule #1: If you don't have a supplier rebate, get one

Rule#2:  If you already have rebates, increase them

Rule#3:  If can’t increase them, roll them into net pricing and lose them

Rule#4:  See rule #1

The first efficiency any buyer can achieve is a reduction in pricing or improvement in terms. And given the intense focus every retailer is placing on price cuts, the demands for support will be hectic.

Historically, the "best in class" advice is to develop defensible, criteria based trading terms and focus on compliance and performance. And sensible though this is, there are few companies with the scale and cahoonas to tough it out and go toe to toe, at the best of times. Suppliers can't support  everyone. Choices have to be made. So what to do? 

Here are 5 alternative rules for suppliers to adopt when playing the trade terms game:

Rule #1: Do not panic - the buyers are under intense pressure so any requests they make reflect their stress, not yours

Rule #2: Scenario plan - as a key account organisation, consider how conversations may pan out. Identify risks and opportunities and plan worst case situations, know your walk away points and develop Plan B. Wherever possible, do this before you start any negotiations

Rule #3: Think like a buyer - whilst you don't always consider this, buyers are competing against other retailers for your company's money. So what's in it for you? If you are considering incremental investment, make sure you are getting incremental distribution, more space, additional feature support

Rule #4: Focus on efficiencies. Seek out opportunities to simplify the way you do business together, stripping out noise and complexity.  This should be something more than shunting costs from one side of the table to the other to  lower total delivered costs through the value chain.  This is the only way to find long-term savings to fund sustainable re-investment.

Rule#5: See Rule #1

Whereas the buyer rules have a simpler, pithiness to them; the supplier rules have the pith removed. Hopefully, this is where the pith taking stops.