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Retail industry is paying price for ill-prepared negotiators: global study

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Swathes of executives in the retail sector are striking deals worth millions of pounds without adequate preparation – and are delivering disappointing results, according to the world’s most comprehensive study into business negotiations.

The Scotwork International Negotiation Skills Survey explores the tactics employed by over 5,000 executives in some of the world’s largest organisations across 31 countries and 51 industries. Those that took part control billions of pounds in corporate buying power, with over one in three routinely striking deals worth over £1 million.

It lifts the lid on the methods used in the retail sector to create value throughout the supply chain. The Scotwork report reveals three major findings:

1.       Most retail deals disappoint: Only 29% of retail executives always create long term value for their businesses and only 27% always feel that their negotiations help to build lasting business relationships, considerably lower than the global average (34%).

2.       Poor preparation is resulting in bad trades, with 34% of executives in retail never or only occasionally having a fallback plan if things go wrong

3.       The average negotiator is a poor negotiator: 56% of retail executives in negotiating positions do not always know what the best outcome of a negotiation would be; they act selfishly and don’t trade when they should


Richard Savage, director of Scotwork UK, said: “The retail sector is at a crossroads. As the power balance shifts away from the retailer and is spread more evenly around brands and suppliers, the ability to trade and create value has never been more important.

“Negotiating is the most neglected professional skill in retail. This study lays bare the substantial skills gap around the world, particularly within retail where negotiation requires a careful balancing act. The most common mistake is to pursue as much of what you can – typically money – in exchange for nothing. If companies fail to see the value of exchange, of trade, they are missing out in ways that far exceed pounds and pence.”

The wider Scotwork report also reveals the lengths all negotiators across business will go to in order to influence the power balance during negotiations. These include:

  • Lying: 46% of buyers have been lied to during negotiations
  • Threats: 37% of sellers say buyers have delivered veiled threats
  • Misdirection: over half make false claims, set false deadlines or refuse information
  • U-Turns: 60% of sellers have reneged on an agreement to suit their cause

Richard Savage added: “Commercial negotiations are not for the faint-hearted and our study demonstrates just how prevalent cut-throat tactics are. The fact you might encounter challenging approaches makes it all the more important to have clarity on what value you wish to secure from the negotiations in advance. It is therefore all the more concerning how few businesses have this clarity before they sit at the negotiating table.”

 

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