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Last updateThu, 20 Jul 2017 8am

Applied Marketing 101: How to improve your supplier network

For the past several years, I’ve been seeing evidence of a strong bifurcation (a fancy way of saying a split into two halves) that’s taking place in the independent jewelry sector. Increasingly, while many stores are doing extremely well, there are others that are doing pretty poorly. I’ve recently been working on a project designed to identify the causative agents that are producing this split, and among the most important appears to be the “Ecosystem” that has been created by the store owner(s) in which the store operates. So this month, let’s take a look at some of the moves you can take to improve your Operational Ecosystem (OE).

First, let’s define the term.

A store’s Operational Ecosystem is comprised of the suppliers and consumers that are linked to its revenue stream, as well as the physical plant in which it operates, and the market in which that plant is located. The caliber of each element is likely to have a significant impact on the quality of your store’s OE, so anything you can do to improve these elements will necessarily have a beneficial impact.

Some things are harder to change than others. For example, if you’re located in a dying community, you’re going to have a much harder time - all other things being equal - than if you’re in a robust micro-economic environment.

Without question, the easiest element to improve is the supplier element. One thing I’ve definitely noticed over the years is the direct relationship between a given store’s annual sales volume and its list of primary suppliers. Five million dollar stores generally have a totally different set of suppliers versus five hundred thousand dollar stores. And if you plot the two groups of suppliers, you’ll generally find:

a) The larger store suppliers are closer to the apex of the food chain, and generally have better prices;

b) The larger store suppliers generally offer a wealth of support, in part to ensure sell through;

c) The larger store suppliers generally operate on sound business principles, and treat their customers like rational business people, as opposed to irrational consumers;

d) The larger store suppliers generally have shelf stock of key items, because larger stores generally reorder fast sellers on an ongoing basis;

e) The larger store suppliers are generally willing to have a lop-sided relationship, in which the benefits of the relationship are slanted towards the retailer, but are unwilling to have a one-sided relationship, where the retailer is getting all of the benefits;

f) The larger store suppliers generally have the best sales people, because higher sales volume generally means higher income levels, so the best paid reps are working at the best companies.

So, as you consider your own supplier list, are there some that you should consider replacing? And if so, how do you know which new ones to approach? Of course, you can often learn a lot about who’s doing a good job by speaking with other jewelers to see who they have found to be helpful. But in a quantitative way, you can actually get an excellent sense of who you should be working with by connecting with the Edge Retail Academy, and reviewing a report titled the KPI (Key Performance Indicator) Report.

You’re probably familiar with the Edge, the company that makes arguably the best Point of Sale software system for independent jewelers. But you may not know about the Edge Retail Academy, a consultancy that is tied to the Edge as a “sister” company. I have attended at least ten Edge Retail Academy Seminars, first as a student (in order to better understand the challenges that retailers face), and then as a lecturer, on the topics of Marketing and Trend Identification. ERA personnel are among the most knowledgeable in the industry in their respective fields, and I learn something new every time I’m with them. But they also do something amazing with data - something so extraordinary that from my viewpoint as a Marketing Statistician, it possibly represents the single most valuable information set available in the jewelry business.

You see, one key methodology the Edge Retail Academy employs to assist its clients is Data Aggregation. They accumulate all of the sales data from over 700 American independent jewelry stores every month, and then compile a 29-page report that is invaluable if you want to improve your store’s performance, as well as if you want to understand who are the best suppliers, and what are the best products for you to carry. The last 4 pages of the KPI report identify the top 20 suppliers by both sales volume, as well as by units sold, and then also identifies the actual items, both in a 30 day as well as a 12-month cycle, that were the best-selling in the 700 stores! 

So, if you knew which companies were the top 20 suppliers to over 700 stores, would you perhaps consider talking to them to see what they do that produces such excellent sales results? And if you knew the top 15 selling skus in over 700 stores, by both quantity as well as by gross profit produced, might you want to at least consider stocking those?

The Edge Retail Academy data can help you identify the best suppliers, so you can adjust your store’s supplier pool to improve your company’s OE. But you can take an additional step to further refine your supplier network. Recognize that just as we’re seeing a general reduction in the number of independent jewelry stores (I suspect we’ll lose between seven and eight thousand stores over the next decade), we’re also seeing a significant restructuring in the supplier community. When you choose to buy from a specific supplier, you’re not just increasing the probability that they will be among the survivors. You’re also providing them with the potential opportunity to invest in additional services that will ultimately help you become better at what you do.

So, when you look at the supplier portion of your ecosystem, I encourage you to evaluate each existing supplier in terms of their capacity, as well as their willingness, to invest in your future. Are they the kind of company that’s all about maximizing today’s sale, or do they take your long term best interests to heart? And do you see them investing in new ways to help you increase your sales and profits? Remember, you have the power to help them do good things for you, because your purchases will determine which suppliers survive and thrive.

Choose wisely! Your store’s future success depends on it.

Class dismissed!

George Prout is Vice President of Sales and Marketing for Gems One Corporation, and can be reached via e-mail at This email address is being protected from spambots. You need JavaScript enabled to view it. , or at Gems One’s New York office at 800-436-7787.

 


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