New Product Procurement: A Summary of Buying Practices and Acceptance Criteria At U.S. Supermarket Chains
Fredericks, Peter J.; McLaughlin, Edward W.
The introduction of new products to U.s. supermarkets is a business function with significant implications for all food system participants -from manufactures and supermarket retailers to consumers. In 1991 over 16,000 new items were introduced into the U.s. grocery distribution system, more than a 1,000 percent increase from the average number of annual introductions during the 1970s. Despite the magnitude of product introductions, and given the central role supermarket buyers play in the ultimate success or failure of manufacturers' new products, the new product procurement process of U.s. supermarket chains has comparatively been little researched. The intent of this study was to examine the new product review process of U.s. supermarket chains and thereby gain an improved understanding of supermarket procurement procedures. Additionally, this study reviews some of the factors behind the growing number ofnew product introductions and discusses the impacts and costs of the proliferation of grocery products on food system participants. Data for the study came from a nationwide survey of the top 200 U.s. supermarket chains. Responses from more than 100 different chains provided information on the typical buying structures utilized by food retailers, the role supermarket buyers play in the introduction and acceptance/rejection of new products, and important attributes buyers look for when evaluating new products.More than 60 percent of all newly introduced products are turned down by supermarket chains and never make it onto store shelves. Of all products accepted by supermarkets, approximately one-half have been removed from retailers shelves within a year due in part to poor sales levels. The development and introduction of new products when combined with the substantial number of product failures consumes considerable resources among all participants in the grocery product distribution system. There are however, steps manufacturers can take to increase the probability of their new product being successful. These include developing and offering products that are fundamentally new, or that are in strong growth categories, to working more closely with their retail accounts and forging true partnership relationships. In today's competitive food industry it is imperative for manufacturers and retailers to understand each other's actions and expectations regarding the introduction of new products for the long term success and profitability of all parties.
A.E. Res. 92-12
Charles H. Dyson School of Applied Economics and Management, Cornell University