Luxury brands build stronger supplier relationships

7 November 2014

Luxury goods organisations have stronger relationships with suppliers because they create trust and loyalty, according to research.

These types of brands are more likely to spend more time with suppliers and understand them at a personal level, the study says. Often design-led, luxury brands are also always pushing suppliers’ capabilities and testing their flexibility.

Procurement consultancy State of Flux’s study of luxury brands, part of its annual research into supplier relationship management (SRM) launched yesterday, said 59 per cent of luxury brands reported more innovation from suppliers as a result of their SRM programmes. This compared to 43 per cent across all industry sectors surveyed.

Premium brands have a better understanding of the value of SRM and how it aligns with organisation strategy. They are also more driven by being the "customer of choice" for suppliers, rather than obtaining cost savings, because of their focus on quality, exclusivity, cutting-edge technology and customer experience.

These luxury organisations are also more likely to get feedback on supplier perceptions of them, and work harder to create and maintain supplier loyalty, often translating this from their strategy of maintaining loyalty from their customer base.

This is often done by treating supplier staff as members of an extended team, with some giving staff benefits to strategic suppliers, others invite suppliers to customer events and activities or offering training courses.

Although luxury brand organisations are very good at the human elements of SRM, they still need to introduce more structured governance and process models the study concluded.

Speaking on a panel at the launch of the State of Flux’s The Journey to Customer of Choice report, McLaren Automotive’s head of SRM Dom Tribe, and Stephen Potts, supply chain director at yacht manufacturer Sunseeker both emphasised the need for collaboration, getting suppliers engaged and including them in the journey of the brand.

“Loyalty and the brand is king,” said Tribe. “Customers are very demanding. But we invite suppliers to see the products and often it’s a light bulb moment for them.”

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