HRG’s mission is to help you keep more of your hard-earned money by tackling unauthorized retailer deductions, chargebacks, and allowances. Today, I want to share some insights from our recent episode of The Savvy Supplier podcast, where we discussed the often-overlooked headaches suppliers face when their retail partners go through mergers or acquisitions.
If you've been in the supplier game long enough, you know that mergers between retailers can introduce more than just new buyers you will need to impress. They bring layers of complications, especially when it comes to ensuring your terms, pricing, and deductions stay aligned across the board. Let’s walk through some key challenges—and, more importantly, proactive steps you can take to protect your business, empowering you to navigate these changes with confidence.
1. The “Most Favored Nation” Clause: What It Means for You
The' Most Favored Nation' clause is one of the trickiest challenges in mergers. This clause, which ensures that any given retailer receives the same favorable terms you may offer others, can become a major point of contention. In a merger, the acquiring retailer may demand that your terms with both entities now match—and they’ll often expect the lowest terms to apply.
Pro Tip: Anticipate this and get in front of it. Set up a meeting with your retail contacts to clarify expectations and review which terms you’ll continue to honor post-merger. This simple step can save you the hassle of costly back-and-forth claims.
2. Product Returns: When a Headache Becomes a Migraine
Returns are challenging enough without a merger, but when you add another retailer’s return policy to the mix, it’s easy to pay twice. We’ve seen cases where one retailer handles returns based on actual claims while the other uses an allowance percentage. After a merger, there’s potential for double-dipping—one retailer accepting an allowance while the other still charges for every return. Trust me, those costs add up fast!
Action Step: Following a merger, carefully review your retail agreements. If you’re seeing double charges, don’t hesitate to request a detailed audit or push back. Often, a simple conversation can reveal discrepancies, and in many cases, your retail partners will adjust their approach.
3. Invoicing Confusion: The EDI Code Problem
Electronic Data Interchange (EDI) is a lifeline for efficient transactions, but it can get messy fast during a merger. Each retailer’s system has unique EDI codes for different allowances (like warehouse or cash allowances). After a merger, mismatched codes can result in unintentional double charges or claims for missing allowances.
Stay Proactive: Work closely with your finance teams to ensure all EDI codes are updated and aligned between the two retailers’ systems. It’s not the most glamorous task, but will prevent future billing discrepancies.
4. Freight and Shipping Factors: Who Covers What?
One surprising area of contention is often freight costs. Some retailers prefer a “collect” model, where they pick up products, while others want “prepaid,” meaning you, the supplier, cover shipping. After a merger, this can lead to confusion, with each retailer believing it deserves the “better” deal. If freight terms are overlooked, you could be asked to provide the lowest cost—even if it wasn’t in your original agreement.
Pro Tip: Before the merger’s impact hits, initiate a conversation with the buyer about freight terms. Make sure your buyer knows there may be differences in shipping costs so they aren’t surprised if prices vary due to collect versus prepaid freight.
5. Promotional Strategies: Avoid the “Best of Both Worlds” Trap
When different pricing strategies meet, like everyday low price (EDLP) versus high-low promotion models, mergers can create unrealistic expectations. Auditors might try to cherry-pick favorable terms from both sides. For instance, if one retailer typically offers high promotional discounts, they might expect the same deep discount even in an EDLP scenario. Without an intervention, these conflicts can result in unnecessary deductions.
Preventive Measure: Have a direct conversation about which promotional model you’ll align with and communicate any differences. By aligning with the buyer early, you can avoid justifying your pricing strategy later.
Wrapping Up: Communication Is Key
Mergers are complex, and can feel like a minefield for suppliers. However, you can sidestep many common pitfalls by proactively communicating with your retail partners and clarifying terms and expectations. At HRG, we’re here to help you through every twist and turn.
If you’re dealing with post-merger headaches or want to be prepared for the next time a merger occurs, reach out to us at HRG. We’re always here to help you navigate the complex world of retailer-supplier relationships. And don’t forget to tune into The Savvy Supplier for more tips on keeping those retail deductions in check. Until next time, make wiser decisions, and let’s reduce those deductions together.