Why sales models are being changed
There are many reasons for the transition, ranging from changes in conceptual perspectives to financial considerations and legal factors. Swiss Distribution spoke with Pierre-André Konzelmann, Head of Operating Models Europe at Valora’s Retail Division.
Swiss Distribution: Who is Valora?
Pierre-André Konzelmann: At Valora, we aim to bring a little happiness to people on the go with a comprehensive «Foodvenience» offering. Our strategy combines fresh food, merchandise, and services for everyday use. Through its various brands, Valora operates over 2,800 mostly small-format retail locations in high-traffic areas across Switzerland, Germany, Austria, Luxembourg, and the Netherlands. We also operate one of the world’s leading production facilities for pretzel-style baked goods. The Valora Group is the European retail division of the publicly traded Mexican company FEMSA.
How are Valora's distribution models structured?
We operate our retail locations as agencies, franchises, and company-owned stores, with the majority operating under the agency system.
The Avec stores were operated under a franchise model for years. Some time ago, the company switched to an agency model. What were the reasons behind this decision?
For us, there is no such thing as «the best» distribution model; rather, there is the model that best fits our business strategy. A transparent pricing strategy, product promotion, and the timely availability of new product lines are very important to us. In addition, we want to support our partners as best we can in all matters so that they can focus on their day-to-day business. That is why we have opted for the agency model, under which, for example, we also provide agency operators with a location in a high-traffic area.
What were the main challenges involved in this transition?
It was particularly important for us to maintain the flow of information with our agency partners, to explain the legal aspects transparently, to highlight the benefits of this model, and to closely support them through the transition phase—in other words, to answer questions such as: What’s in store for me? What will change for me? Who can help me? Providing various types of information was also very important to us—specifically, conducting training sessions and preparing detailed documentation.
«At the beginning of any change, there are always obstacles, and it's important to navigate around them using the right approach.»
How did the sales partners react to the changes?
It was an opportunity, but one that required a great deal of active effort on both sides. The lesson we all learned was that the transition is a phase that requires a lot of time and discussion, and that we need to set aside enough time for it.
Even though Valora has abandoned its franchise model in Switzerland, are there still reasons to support franchising?
Yes, there are still situations where franchising makes sense, especially when it comes to expanding into new regions or countries, sharing capital and risk, or getting certain locations up and running more quickly.
Can «universally applicable» lessons for the retail industry be drawn from Valora’s experience with transitioning to a new sales model?
In summary, I’ve learned the following: a clear strategy, thorough preparation, a steady flow of information between the parties, frequent one-on-one conversations, and perseverance. Fundamentally, I’m convinced that a strategy only takes effect over the years. At the beginning of any change, there are always obstacles, and it’s important to navigate around them using the right approach.
The Difference Between Franchising and an Agency
Franchising and agency agreements have in common that they aim to sell products and services, with the principal collaborating with independent sales partners (franchisees and agents) on the basis of a contract. They differ primarily in terms of responsibilities, the investment required for business operations, and, consequently, the allocation of risk. In addition, the legal frameworks differ.
Responsibilities
In franchising, franchisees are responsible for the day-to-day operations of their business, including staff, inventory management, and customers. However, the franchisor provides support to ensure that the businesses comply with the franchisor’s standards and guidelines. The franchisee acts in their own name and on their own account. In contrast, while an agent typically assumes responsibility for marketing their principal’s products or services, However, customers have a legal relationship with the principal. Accordingly, the agent acts on behalf of the principal and for the principal’s account. This allows the principal (unlike the franchisor) to set the prices for products and services.
Investments
Franchisees make an initial investment in their business and cover ongoing operating costs, specifically for the goods they sell. Agents, on the other hand, do not make any product-related investments.
Risk Assumption
The franchisee bears the business risk for their operation, including the products. They are therefore entitled to the corresponding profit. The agent bears no inventory risk but receives a commission for their business activities on behalf of the principal.
This interview is a contribution from the m&k partner association Swiss Distribution. It was led by Dr. Christoph Wildhaber. He has been working in the field of sales for 30 years, including as an attorney.
