Twenty Years of RVCF: A Celebration of Collaboration
Monday, November 25, 2019
Posted by: RVCF Admin
The Retail Value Chain Federation (RVCF) celebrates its 20th anniversary in 2020. Much has changed in the retail industry over the past two decades in terms of technology, shopping channels, order fulfillment, and customer behavior and expectations. One constant has been the need for collaboration among trading partners and peers to navigate the most pressing challenges, share ideas, and develop innovative yet practical solutions to lift the industry as a whole.
For 20 years, RVCF’s core mission has been to bring industry stakeholders to the table to solve problems. We exist to be the driving force in collaboration. As we celebrate this important milestone, we want to look back at how and why RVCF came to be, how the organization has evolved over the years, and where we stand today.
The Early Years
Heading into Y2K, the economy was surging. The economy and consumer spending were growing at a rate of about 6 percent and unemployment hovered around 4 percent. The retail industry was coming off a strong holiday season and retail sales were up across the board. E-commerce was still in its infancy, accounting for 0.5 percent of total retail sales in 1999.
Retail sales numbers painted a rosy picture on the surface, but angst and aggravation were percolating behind the scenes. Merchandise suppliers were overwhelmed by chargebacks and sales deductions from their retail customers. This was costing suppliers real money, as much as 5 percent of gross invoice in some cases.
In early 2000, about 100 major merchandise suppliers, mostly general merchandise and fashion companies, gathered in New York to discuss this costly problem. The universal feeling was that they were being taken advantage of by retailers. A survey of the attending suppliers revealed two key findings. First, retailers wanted inventory to flow though the system without delay, which was not unreasonable. They wanted the Perfect Order, which was an unrealistic expectation. Second, suppliers admitted that they weren’t doing a very good job at filling orders, which was causing a major disruption to retailer operations.
The decision was made to create the National Vendor Compliance Organization (NVCO) to enable suppliers to come together and figure out the deduction problem. At the second meeting, A representative from Saks Fifth Avenue addressed members of the group, discussing their compliance requirements and the real-world impact of noncompliance. This meeting provided merchandise suppliers with something they desperately craved – direct access to the retailer. The meeting was extremely productive and set the tone for future collaboration.
During the early years of the NVCO, retailers were skeptical about the intentions of the group, which was very much supplier-focused. When retailers realized the main objective was to provide suppliers with the information and guidance they needed to ship orders according to retailer specifications, retailers started to warm up to the organization. A number of retailers, such as J.C. Penney, Kohl’s, and Dillard’s, have been involved since those early years and remain supportive to this day.
A Pivot from Symptom to Cause
NVCO was originally created to give merchandise suppliers a collective voice in dealing with mounting deductions from retailers. The organization was essentially a board of advisors from the supplier sector. But we soon realized having one side represented would not allow us to fully understand the relationship between trading partners and address the needs of both sides. Also, deductions were the symptom, not the cause. To fix the problem, we would have to identify and focus our efforts on the cause.
Once we redefined our purpose, NVCO became the Vendor Compliance Federation (VCF), an independent organization that would represent the interests of all trading partners and the industry as a whole. Rather than simply reducing deductions, VCF focused on the processes, best practices, and solutions that would prevent those deductions from happening. How can vendor compliance be better managed? What technology can be implemented to reduce the risk of errors? How can changes to retailer requirements be communicated to merchandise suppliers more quickly and with more transparency and clarity?
To answer these questions, VCF planned events and developed resources that retailer and merchandise supplier members could use strategically and in their day-to-day operations.
For example, one of the biggest challenges for suppliers has been keeping up with changes to retailer order fulfillment requirements with their vendor compliance program. 20 years ago, retailers used to distribute books that were hundreds of pages long. Suppliers would then have to reconcile changes when a new book was released. Even when these requirements moved online to retailer portals about 15 years ago, tracking changes was still tedious. The schedule and process for updating requirements and alerting suppliers to changes were different from retailer to retailer. Suppliers would have someone constantly combing retailer websites to see if anything had changed. This was a major drain on resources.
Suppliers asked VCF to develop some type of solution in which the organization would track and alert suppliers to changes to compliance requirements. This led to the creation of the Vendor Compliance Clearinghouse in the mid-2000s, which evolved into today’s Compliance Clearinghouse. Currently, RVCF monitors the order fulfillment requirements and compliance programs of more than 100 retailers.
We also saw a need to provide guidance to suppliers in the area of supplier relationship management. At that point, each retailer had their own way of dealing with suppliers – different forms of communication, different nomenclature, different technology, different requirements, different terms and conditions, etc.
Similar to customer relationship management, supplier relationship management involves measuring supplier performance, communicating effectively with suppliers, assessing the value of the supplier to the retailer organization, and other activities that would support a more amicable, profitable relationship and better serve the customer. Our goal was to get retailers on the same wavelength so they could manage and communicate with suppliers in a similar fashion by developing better compliance programs, better compliance scorecards, and better supplier portals. To this day, our organization is still one of a select few that proactively addresses supplier relationship management.
Representing the Entire Retail Value Chain
In 2009, we reassessed what VCF represented. Because the organization was comprised of both retailers and merchandise suppliers, it became clear that VCF was representing the entire retail value chain. This is a much broad concept than vendor compliance. The retail value chain includes all activities involved with selling products to consumers and fulfilling orders, such as forecasting, allocation, order management, order fulfillment, payment, reconciliation, and returns. Deductions for failing to meet retailer requirements could be the result of errors or miscalculations in any area of the retail value chain.
The name of the organization was changed from the Vendor Compliance Federation (VCF) to the Retail Value Chain Federation (RVCF). It’s no coincidence that this change occurred at the same time as the Great Recession. The retail industry changed dramatically in 2008 and 2009. The uncertainty surrounding the recession caused the industry to increasingly focus on cost reduction. E-commerce started to explode.
The key to success in this new retail reality continued to be moving goods from point A to point B as quickly and efficiently as possible. The original mission of RVCF to reduce deductions and increase profits through trading partner collaboration was never more relevant.
A Changing Retail Dynamic
20 years ago, retailers had all the power. Merchandise suppliers shipped goods to retailers, and it was the retailer who sold the goods. It was the retailer who had the relationship with the customer. That’s no longer the case.
Today, as much as 50 percent of sales for several major sporting goods apparel and footwear brands come through their own brick-and-mortar stores and various e-commerce channels. In many cases, the retailer and the supplier are in competition for the customer, so both sides are focused on delivering the best possible customer experience.
While suppliers have expanded their online presence and now have the ability to sell directly to the consumer, retailers have developed their own lines of private label products to offer customers a unique assortment. Retailers are also using drop shipping to sell to consumers without keeping inventory in stock. While e-commerce and new technology have given suppliers leverage they didn’t have 20 years ago, both sides realize how much they still need each other to be successful.
In 2020, RVCF represents retailers and merchandise suppliers. Everyone checks their egos and self-interest at the door as we seek to build alignment in improving business processes, developing best practices, and uniting behind solutions that benefit both sides of the trading partner relationship.
The Road Ahead
Neither retailers nor merchandise suppliers have the advantage in today’s retail landscape. The end consumer calls the shots. The end consumer dictates how goods are purchased and how orders are fulfilled. Terms and conditions are essentially written by the consumer. This is the reality that all stakeholders need to accept. The customer experience is king.
More and more dollars continue to shift online as e-commerce sales increased from $390 billion in 2016 to $517 billion in 2018. If you want to buy a shirt, you don’t have to go to a store and try it on. You can go to an app and snap a photo of yourself, which will tell the merchant your exact measurements so they can make you a custom shirt and have it at your doorstep in a day. With the data collected through website browsing, shopping behavior, mobile apps, and beacons, retailers and suppliers know more about their customers than ever.
Technology is obviously central to retail’s evolution, but those companies that invest in order to get the most out of their people, process, and technology will achieve the most success. That’s the role of RVCF – to provide knowledge and insights that support identified "best practices" throughout the entire value chain and to then facilitate collaboration between retailers and merchandise suppliers so they can adopt solutions that lead to more sales and higher profits.
As a merchandise supplier, if you can meet with a retailer at an RVCF Conference, negotiate a deduction down thousands of dollars and agree on a fix that will prevent that deduction from happening again, wouldn’t you call that conference a worthy investment? Imagine if you could do the same with multiple retailers at the same event. Similarly, if you could receive alerts about changes to retailer compliance requirements as they happen, which the Compliance Clearinghouse provides, doesn’t that make more sense than hiring someone to do the same thing?
These are examples of solutions that were developed based on input from our members. Even though we live in an age of text, chat, and other forms of digital communication, RVCF will continue to be an organization that believes in sitting down and having a conversation. Real progress is made through face-to-face communication. If you can’t sit down together, use video conferencing. Pick up the phone. Attend events and webinars. Ask questions and offer solutions.
When we started this organization, retailers knew two people from the supplier organization – the salesperson and the finance person who collected money. We believe people between the salesperson and finance person should be communicating with their counterparts. This is how you build alignment with technology, operations, supply chain, marketing, and other areas.
The past 20 years have been a rollercoaster ride. Given the current pace of change, we can’t possibly predict what the next 20 years will bring. But we can promise that our commitment to collaboration and overcoming retail industry challenges will never waiver. We’d like to thank our members, supporters, and staff – past and present – for your contributions to RVCF. Of course, we don’t necessarily consider our 20th anniversary a celebration of RVCF. It’s a celebration of collaboration.