The critical role of trust in obtaining retailer support for a supplier's strategic organizational change

Robert F. Lusch, Matthew O'Brien and Birud Sindhav

Retailers and suppliers are working more closely and building longer-term relationships. However, often suppliers undergo major strategic change, which are risky to the retailer. In such situations suppliers need to work hard to make certain that the retailers they supply continue to be committed to a long-term relationship.

This study takes place in the supply channel for hardware. We study a retailer owned wholesale cooperative and the trust and commitment the sponsoring retailers had to this wholesale cooperative. The wholesale cooperative, due to increasing competitive pressures from large big box chain store retailers, made the strategic decision to merge its organization with another retailer owned wholesale cooperative. Not surprisingly many of the retailers experienced dissonance concerning the change and thus both cooperatives had to “market” the change to the retailers. This was also critical because the member retailers had to vote on the merger since they were the owners of the cooperative.

Many of the retailers would be affected by the change because they would need to change their store signage, sku information system, and the identity of their store. Furthermore they would need to develop relationships with new field representatives, distribution centers, and other personnel at headquarters. In such turbulent and trying times the importance of trust as social capital is very important to implementing a successful change effort.

We demonstrate in this article how the trust the retailers had in the pre-merged cooperative is used to gain support for the change. We also show how this pre-trust can be transferred to the new organization and help build commitment to the post-merged organization. Often changes are made in supplier-retailer relationships without recognition of the critical role and influence of social capital. This article should encourage supply chain and retail managers responsible for successfully designing and implementing major strategic changes to factor social capital into their plans.

In summary, then, our study shows the resilience of trust when relational ties go through trying times. It demonstrates how social resources in past relations induce commitment to changed organizations. We show that trust from business partners may be important not only in the context of current relationships, but also for initiating a collective action to garner support for a strategically changed organization. Managerially, then, trust is an intangible resource that may cast its influences much beyond the boundaries defined by the current context. Consequently, trust may be a supplier’s most valuable resource in building and maintaining long-term relationships with retailers.