The Role of the Supermarket Buyer
McLaughlin, Edward W.; Perosio, Debra J.
This study investigates the standard procurement and merchandising practices of wholesale and retail supermarket dairy buyers in New York State. Although much anecdotal and trade information exists regarding how wholesale/retail buyers make decisions, their standard operating practices have not previously been well documented. Yet these decisions and resulting strategies at wholesale/ retail levels can significantly enhance or diminish marketing initiatives and, in particular, the impact of advertising and promotion programs of the dairy industry. The primary data for this study were gathered from dairy directors and buyers from 17 wholesale and retail supermarket companies serving New York State. Mail surveys were employed to determine the factors that influence dairy buyers in their decision making. Additionally, a number of dairy industry leaders were interviewed to assist with interpretation of the survey data. The empirical results and analysis of the study are presented in Section 3. They are categorized into seven principal themes: • Dairy buyer profile • Dairy department structure and operations • Dairy department performance and pricing • New product status in the dairy department • Promotional activities in the dairy department • Buyers' perceptions of dairy suppliers • Impact of legislation on dairy department operations Strategic implications of the study results are elaborated in Section 3 and summarized in Section 4. These perspectives are intended to assist dairy suppliers in their quest to improve industry understanding of their wholesale/ retail customers. Among the key findings: • a shift in emphasis is occurring-away from the buying function alone to bottom line category profitability through the implementation of category management in the dairy department • despite flat sales in the dairy department, as new stores are built and older stores remodeled, buyers expect the dairy department to expand by over 14 percent • labor productivity in the dairy department appears to be the highest of any major department in the supermarket • despite industry urging, direct product profit analysis has not been widely adopted as a dairy department evaluation tool • over one-third of supermarket dairy department sales are from non milk-based products 0, • price alone is not an important factor when considering new products or potential suppliers • relatively large volume increases can be motivated in the dairy department by various non-price merchandising approaches Dairy Department Procurement Dynamics • supplier willingness to tailor promotional programs to retailer needs is viewed as critically important by dairy buyers • the dairy category lags behind most other categories in the supermarket in new product introductions • there are striking and significant differences in how large supermarket firm (annual sales over $1 billion) and small supermarket firm (annual sales less than $1 billion) dairy buyers view and manage the dairy department These and other findings present numerous opportunities for positive responses from dairy suppliers/processors. This type of in-depth knowledge of customer behavior and decision-making criteria allows forward thinking companies to develop successful sales and marketing strategies. This research suggests that closer supplier-buyer relationships and alliances are not simply needed to prosper, but necessary to survive.
Charles H. Dyson School of Applied Economics and Management, Cornell University