In our Advantage Japan programs, we have collected some very interesting learnings around supplier-retailer collaboration in a crisis situation. Due to no lock-down being conducted or allowed by law, our targeted FMCG retailers were able to keep opening business as usual, unlike HORECA. Starting with retailers, what retailers need the most from their supplier partners is quick turnaround and execution on decisions based on the fast-paced change in the local environment. For example, health and beauty suppliers and drugstore and prestige retailers have had to adapt to an environment where consumers are not purchasing as many cosmetic products as they used to before the pandemic. This has especially been the case for higher-margin cosmetic products, like lipstick, where sales have fallen flat because masks and face-coverings have practically eliminated the need to apply lipstick.
In turn, retailers have collaborated closely with their suppliers to focus more on products for eyebrows and facial powders, and to deliver these products with specialized in-store and online merchandising tools to try to cover lost sales from lipstick. From the viewpoint of the retailers, this forward-looking activity has resulted in more favourable, positive feedback awarded to suppliers, creating improvements in their ratings. This is a major learning for us, as this has been applicable to large, medium, and small suppliers alike. Sometimes a big company like Kao or Shiseido will have high ratings in the drug channel, but this year, more local and smaller suppliers have been improving their relationships with retailers, working very hard to satisfy retailers’ needs and improving their position in turn.
In areas such as customer service and supply chain, the big theme has been around how to manage product shortages with excellence in communication and information sharing. With the panic and urgency created around products going out of stock, best in class suppliers have been very forward and upfront with their retailers, communicating the timing and stock levels that they would commit to replenishing store and online inventory. These were the actions that received very favourable feedback given by retailers to their suppliers. The key learning for suppliers is to minimize the efforts spent by retailers as much as possible so that they could always focus on the health and safety of their associates and customers. Suppliers who did this, while shifting their production to health essentials such as masks, hand sanitizer, and soap, received a bonus. We saw this in the ratings and qualitative feedback.
Ultimately, I think that suppliers are undertaking a significant shift in leadership and going above and beyond their daily transactional activity, focusing on treating their retailers as if they were consumers themselves. We have had close discussions with the retailers participating in our Advantage program. They have come to realize that while these supplier-driven activities reduce their daily burden in this kind of situation, they believe this type of preemptive action will continue, even after COVID-19 ends.