In this article, learn about:
How a shifting mindset around GNFR can positively impact retailers and suppliers
How retailers and suppliers can maximize GNFR performance and data with SPS Commerce
Goods Not For Resale (GNFR), often referred to as Indirect Spend, represents the vast universe of essential products and services that are required to run a retail business but are never sold to the end-consumer. This category encompasses everything from store fixtures and IT systems to utility bills and cleaning services. For decades, it was viewed merely as a cost center, a necessary administrative burden to be managed solely through aggressive cost-cutting.
Today, however, that paradigm has fundamentally shifted. As competitive pressure intensifies and consumer expectations evolve, GNFR has emerged from the back office to become a driver of operational efficiency, profitability, and brand equity for retailers, while simultaneously representing a massive, stable revenue stream for suppliers of GNFR products.
In the retail sector, GNFR accounts for roughly 20% of a retailer’s total purchase dollars and involves as many as 80% of their total suppliers. Effectively managing this segment is no longer about trimming fat; it’s about architecting the future store experience and supply chain ecosystem.
Impact on Retailers: From Cost Center to Competitive Edge
For retailers navigating omnichannel complexity and razor-thin margins, optimizing indirect spend is critical. It moves beyond simple expense reduction to fundamentally enhancing core business functions.
Operational Efficiency
GNFR items, such as maintenance services, store supplies, and energy-efficient equipment, are the foundational components of the retail environment. Poor management of these items creates direct and costly disruptions. A lack of proper tracking or a mismanaged supplier contract can lead to missed deadlines for new store openings or remodels, resulting in immediate, unrecoverable revenue loss.
Furthermore, GNFR procurement directly impacts the customer experience. The quality of the interior design, the reliability of in-store digital signage, and the effectiveness of cleaning services determine the customer store experience. By viewing GNFR as a strategic investment, retailers can leverage these purchases to achieve a compelling, frictionless in-store experience, transforming a cost item into a customer differentiator.
Cost Management
While early GNFR efforts focused on simple unit-cost optimization, achieving reductions of up to 15% through volume pooling and supplier challenge for best-in-class retailers, the era of low-hanging fruit is over. Effective cost management now requires sophisticated, multi-pronged strategies to manage demand as well as price.
Key strategic levers include:
Design-to-Cost: For customer-facing categories like furniture, lighting, and specialized IT, retailers employ costing teams to optimize design by systematically reviewing specifications and distinguishing between elements visible to the customer versus those that are purely internal. This ensures the maximum perceived value for the lowest cost structure.
Frugal Spending Approaches: For internal categories like professional services and general office supplies, retailers implement zero-based budgeting (all expenses for a given period must be justified starting from zero, as opposed to the previous budget) and enforce strict consumption policies to control usage rather than just procurement price.
Competitive Alliances: In areas where bargaining power is skewed towards suppliers (e.g., Energy, Telecom, IT), retailers are increasingly forming buying alliances with competitors. This practice, common in Goods For Resale (GFR), increases their collective scale and leverage in the indirect market.
Supplier Relationships
Given that 80% of a retailer's suppliers often fall into the indirect spend category, the relationship dynamic is crucial. The old paradigm of confrontational, transactional purchasing has given way to a mandate for collaboration and strategic partnership.
Effective GNFR procurement practices involve building strong relationships rooted in mutual benefit. This ensures better pricing, quality, and delivery terms, but more importantly, it allows retailers to co-develop innovative solutions. A strong Supplier Relationship Management (SRM) program is essential, simplifying purchasing processes and enabling faster time-to-market for critical projects, such as the rollout of sophisticated electronic labels or fully automated store models.
Sustainability Goals
GNFR is an integral component of a retailer's overall sustainability performance and brand reputation. The procurement of indirect items directly influences the environmental footprint of the entire operation.
From sourcing eco-friendly packaging and store supplies to investing in energy-efficient technologies and sustainable services, GNFR decisions are critical. The most forward-thinking approach is 360-degree ecosystem spend optimization. For instance, instead of just negotiating cheaper energy rates, a retailer might partner with an energy management provider to install solar panels on store roofs, enabling continuous consumption optimization and potentially even creating a new revenue stream by selling excess energy generation back to the grid.
Impact on Suppliers: The Stable, Strategic Market
For suppliers, the GNFR market in retail is less volatile than the GFR market, offering stability and predictability. However, competition demands that suppliers move beyond basic provision to become strategic partners.
Revenue Streams
For suppliers of goods and services (logistics, facility management, IT, marketing), the retail GNFR sector represents a steady and substantial source of revenue. Securing long-term contracts for indirect goods provides stability, insulating suppliers partially from the seasonal or cyclical fluctuations common in the direct (GFR) supply chain. A single contract with a large retail chain can guarantee predictable income and high volume across hundreds or thousands of locations.
Opportunity for Differentiation
In the new retail landscape, suppliers win by being innovative and solving retailer problems beyond cost. Differentiation is achieved by offering solutions that enhance the retailer's strategic goals:
Technology Integration: Offering software-as-a-service (SaaS) solutions for automated inventory handling, in-store client interfaces, or advanced security monitoring.
Customization and Flexibility: Providing services, like store cleaning or maintenance, with flexible contracts and efficient, rapid-response delivery systems that align with the retailer's operational hours and evolving format needs.
Data and Insights: Using their deep knowledge of industry best practices to provide retailers with unconventional ways to reduce operating costs or anticipate consumer trends.
Collaboration and Partnership
Suppliers who recognize the retailer’s strategic priorities—like driving omnichannel maturity or enhancing in-store experience—are best positioned to build lasting partnerships. This requires aligning delivery systems and flexible offerings to support new retail formats, such as modular layouts that can adapt quickly to changing stock or seasonal demands. The most successful suppliers are those who engage in a mutually-beneficial, collaborative process to maximize innovation and long-term value creation.
Conclusion: The Strategic Imperative
Goods Not For Resale is no longer merely an expenditure category for retailers. By strategically managing GNFR, retailers can reduce costs through sophisticated demand management, accelerate their digital transformation, achieve ambitious sustainability goals, and fundamentally enhance the customer experience.
For both retailers and suppliers, the focus on strategic GNFR procurement fosters stronger partnerships, leading to mutual benefits, improved profitability, and the resilience needed to thrive in the dynamic world of online and offline commerce.
Master GNFR with SPS Commerce Analytics Tools
SPS Commerce's analytics tools play a significant role in enhancing procurement optimization for GNFR items by providing actionable insights and streamlining processes on six main fronts:
SPS Commerce’s analytics solutions offer detailed reporting on purchasing trends to help with gaining visibility into spending patterns, helping businesses identify where money is being spent on GNFR items.
For supplier performance analysis, SPS’s analytics tools enable businesses to evaluate supplier performance based on metrics such as delivery times, order accuracy, and pricing consistency.
By analyzing historical data, SPS Commerce’s analytics can help businesses with demand forecasting for GNFR items, such as office supplies or operational equipment.
SPS Commerce’s analytics provide insights into procurement costs, enabling businesses to have more insightful cost control and budgeting plans.
Analytics can identify bottlenecks or inefficiencies in procurement workflows for GNFR items with process automation insights.
SPS Commerce’s analytics tools can track procurement activities to ensure compliance with internal policies and external regulations, working to mitigate compliance issues and manage risk.
