Dealing with Retail Suppliers

Retail Suppliers

Buying techniqes with retail suppliers, from Retail Truths

Truth #139: Buying sometimes requires salesmanship too.

Attracting retail suppliers away from an existing relationship or convincing him to broaden distribution often requires going on the offensive—we have to pursue the line and convince the supplier his sales will increase by opening us as a dealer.

A supplier tends to judge our potential largely from superficial aspects of our stores—size, products, amount of inventory, design, décor, displays, organization, customer traffic ….

But we can provide other information too, often more influential. We can tout our sales, play up our promotions and events, explain our customer followings, brag about recent transactions, talk up our credit history, point out our long-term stability, show off our systems, introduce impressive salespeople, give a tour of our facilities, etc. “Business has been great; we can hardly keep up.” “We’ve sold six of these already this week.” “We’re the biggest dealer in the area for ….” “We get a lot of requests for products like yours.” “Let me show you around and introduce some of our people.” “Things are a little disorganized because we just finished a huge sale.”

Credit history and financial strength strike a particularly strong chord with many retail suppliers who are continually frustrated by dealers who don’t pass credit approval, are put on credit-hold, or impose buying freezes because they’re out of cash.

Vendor representatives in retailing, from Retail Truths

Truth #138: A rep is a bridge over the abyss between  supplier and retailer.

Retail suppliers and retailers live in different worlds. A manufacturer or supplier knows little of retail locations, display, salesmanship, advertising, and the myriad other challenges and expenses a retailer faces.

Likewise a retailer knows little of product development, patents, sourcing, factories, quality control, distribution, and other manufacturing necessities.

The rep is the assigned interface between the two disparate factions, charged with forging and maintaining mutually profitable relationships. He brings the manufacturer’s offerings and messages to the retailer, and encourages and facilitates transactions.

Smart retail suppliers rely on the rep to bring back market feedback and suggest ways products and business could be improved.

Retail distribution and representatives, from Retail Truths

Truth #140: Distribution is determined by the market, not supplier benevolence.

Retail suppliers want the broadest possible distribution of their products to maximize their sales and profits. Retailers want the narrowest possible distribution of the products to maximize their own sales and profits.

The compromise they reach depends almost exclusively on the relative market strengths of the product and the dealer. If the product is such a hot seller that retailers would be unwise to do without it regardless of how many dealers are in a market, distribution will probably not be limited at all (except possibly by the rep’s and the supplier’s desire not to have to deal with small orders and dealers).

If, on the other hand, the product is a slow seller, the retail supplier might be lucky to get just one retailer in a market to handle it; exclusive distribution is often a given.

The clout of the retailer is determined by how much of the product he can sell in the market. If he can sell large quantities, the supplier might feel that he wouldn’t get the same sales from any single or combination of alternative outlets in the market. Rather than risk upsetting or losing the good retailer, he’ll limit his distribution in this market to the large retailer.

If, on the other hand, a retailer’s sales are low, the supplier can be expected to open additional outlets if he can or change to a dealer that offers more promise; if the existing small dealer becomes upset, he hasn’t lost much.

A jilted retailer is sometimes surprised by a retail supplier’s assessment of better potential elsewhere, but he should not be surprised by the process.

Retail supplier techniques, from Retail Truths

Truth #142: A savvy supplier has a bag full of tricks.

Many of the devices for inducing retailers to buy are straightforward economic incentives: quantity discounts, introductory pricing, cumulative discounts, year-end rebates, throw-ins, limited-time specials, return options, advertising co-op, free freight, extended terms ….

Others are requirements to demonstrate commitment to the product: opening orders, stocking requirements, buy-ins, periodic re-ups ….

Occasionally there are overt appeals to personal interests: trips and prizes for owners and buyers, spiffs to salesmen, etc. (all direct conflicts of interest for the store).

Then there are comparisons to sales of other dealers and markets as well as to previous years. Often they include implicit or explicit threats to broaden distribution.

None of these are inherently unfair—indeed a retail supplier must promote sales of his products and ensure that his dealers represent them appropriately.

Conflicts arise when aggressive retail suppliers and reps press quantities or products that the retailer is unlikely to resell easily or at a reasonable profit.

Purchasing techniques in retail, from Retail Truths

Truth #143: An experienced buyer is a worthy opponent.

Smart retailers are hardly defenseless. They’ve seen most of a retail supplier's tactics and have developed responses and techniques for coping with them.

Pitches to try unattractive products evoke friendly procrastination (since outright rejection is confrontational and counterproductive). Continued pressure might bring the retailer’s suggestion of taking the products on consignment or with a return option.

Quantity discount requirements are sometimes met by scheduling split or delayed shipments. (Retailers with sufficient clout dispense with quantity discounts by negotiating end-column pricing on every purchase regardless of timing.)

A supplier’s frustration over low sales is soothed by an offer to gather the store’s salespeople so the rep can better train them on the products.

Implied threats to broaden distribution prompt similarly implied threats to reduce orders and/or take on competitive products.

And everything is conveyed with politeness to avoid hard feelings that might lead the supplier or retailer to do something out of spite.

Retail supplier expectations, from Retail Truths

Truth #145: This year’s purchases are next year’s baseline.

Manufacturers and suppliers like and expect their sales with a retailer to increase from year to year.

Most sales managers provide their reps with annual comparison reports. When a report shows a decline, the retailer should expect scrutiny, often pressure, and sometimes threats. As a result many retailers plan their purchases carefully, allocating them to align with the manufacturer’s fiscal years. Some even shift orders to alternative manufacturers to keep sales trends with important manufacturers and suppliers smooth.

When aberrations are unavoidable, for example as a result of a large one-time customer order, some retailers notify the rep and manufacturer (in writing) of the reasons for the spike, so they can later remind them of reasonable expectations.

Treating supplier reps fairly, from Retail Truths

Truth #147: Careful what you dish out as one day you might have to eat it.

When a line doesn’t sell well or we find another product we’d rather sell, we stop ordering. When the rep asks us why, we seldom reveal our intentions or willingly give up the line.

Sometimes it’s because we think we might someday order again. More often it’s because we don’t like the idea of a competitor getting the line.

If a supplier and rep have been honest and straightforward in their dealings with us, it’s only fair to amicably end the relationship and allow them to make their livings. Word gets around quickly if we don’t deal fairly.

And at some time in the future this rep, manufacturer, or retail supplier might have a product or line we’d like.

 

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