There’s a common misconception that Private Label Suppliers (PLS) don’t have same freedom when negotiating prices with dominant retailers. PLS can think they are locked into prices, to the detriment of their business growth and profit margin. However, PLS can and should navigate a price increase in the same way their branded counterparts do.
Below are some key areas of focus for a PLS to consider when navigating and preparing for negotiating a price increase:
- A price increase should be treated as any other commercial decision would.
- It’s important to understand your contractual position well, when negotiating with dominant retailers.
- PLS need to understand COGS, components, and volume/cost relationship in more detail than traditional branded suppliers. This enables successful pricing negotiations with dominant retailers.
- Category research is essential in understanding price architecture within the categories a PLS is supplying to.
- It’s beneficial to approach retailer partners proactively and facilitate open dialogue around pricing and negotiating.
- Be prepared to be asked for additional retailer support (marketing etc.) as this is one element that will assist in growing both the retailer brand and your volume of sales.
- Ensuring a win/win outcome for both parties creates more opportunity for movement and better outcomes within business negotiations.
Hexis Quadrant, through working with both retailer and supplier clients across Australia and New Zealand, have developed a detailed step-by-step framework for implementing a price increase effectively. This process as you can take many months to effectively implement and needs to be developed at shopper, category, brand, channel, and customer levels.