The root cause of the problem is that nowadays, category retailers are becoming so powerful that they have transited from the status of ‘platforms of sale’ to ‘clients’.
The main problem of all problems is that category retailers have become very powerful and for the most part, control the supply chain of products. Although Clearwater has been in business for a long time and has made a name and reputation among the consumers, yet the growing power and influence of the category retailers on the vendors is raising a lot of challenges for Clearwater. No more can Clearwater maintain a high profile of profits by merely supplying to the traditional department stores because sales on the category retailers far outweighs the sales achieved by these traditional department stores. However, serve category retailers raises a range of problems for Clearwater. Firstly, Clearwater is a well-reputed brand and supplying the category retailers its products without additional marketing leaves no difference between an ordinary brand and Clearwater. Its identity gets merged into the identity of category retailers unless additional money and effort is vested in advertising and marketing of its products. Secondly, in order to make money by supplying its products to the category retailers, not only does Clearwater need to customize the quality and features of its products to the needs of the category retailers, but it also needs to change and modify its supply system in a number of ways in order to accommodate the needs of efficiency and quantity along with quality of the category retailers. Thirdly, Clearwater is not used to such a supply system and it needs to make significant changes in its business practices in order to be successful with and get used to the changes. Lack of experience in this regard thus surfaces as another challenge. The growing popularity of the category retailers and the simultaneous decreasing profitability of Clearwater’s business is the problem. Category retailers are just as important, if not more, as the target audience or consumers for a manufacturer. They can both make and break a business.
In order to solve the problem, Clearwater needs to make a cost vs benefit analysis of the two approaches. The first approach is to continue selling its products through traditional department stores. In this case, Clearwater should estimate how much loss has been incurred in terms of lost profitability in the recent years and estimate further losses into the future on its basis. The second approach is to estimate the cost of modifying business practices, customizing to address the needs of the category retailers, and the cost of continued marketing and weigh it against the estimated profitability achieved by selling its products through the category retailers. Clearwater should go with whichever approach proves more economical and profitable. Ideally, it should sanction a part of its establishment to conduct business through category retailers while maintaining the original practices through the other part. Subsequently, it should grow the part that yields more profit.