Recently I was discussing inventory with a retail client, and we spoke about the amount of aged inventory they had with a particular vendor. The retailer had asked the vendor if he would be willing to exchange the product and was denied.
The retailer said, “I’m not sure why he wouldn’t cooperate.”
I tried delving deeper. “Does he process reorders quickly?”
The retailer was blank. “What reorders?”
Unfortunately many stores face this situation. Vendors are expected to take back items that don’t sell, but retailers won’t give vendors (or themselves) the chance to sell the product that makes the vendor and themselves 80% of their profit.
It is commonly known that 20% of your inventory accounts for 80% of your sales. The same applies to vendors – more so since they have a more limited collection to choose from than you do. Still, based on the decisions of the retailer they are denied the opportunity to sell more, and thus get frustrated when asked to deal with the 80% that does them no good.
A human resource critical to your business, and one that is often ignored, is the vendor – without him you have no product to sell.
Vendor relationships can be as varied as human emotions. Both parties can get antagonized easily and you may very easily find your vendor on the other side of the fence. Whatever may be the differences, both of you share a strong common motive – both of you benefit when more of the product is sold. If seen from this perspective, you can see the two of you as united partners rather than adversaries.
How do you make this relationship stronger?
• Order your fast sellers repeatedly. This should be pretty obvious to you as well as your vendor. Do you know what the cost of buying a new item is? No, it is not the wholesale price. For you, the cost of buying a new item is the cost of travelling to trade shows, time spent looking at a rep’s range, and setting up the system, along with your staff’s time with display tickets and getting it displayed. For your vendor, it is travelling to trade fairs or customers’ stores, set up costs and design.
What does it cost you both when you re-order the item? Ignoring restocking and freight, the only cost is an e-mail and the cost of the items, and the same holds true for your vendor. For both of you, the profit comes when a good selling item is sold a second, third or fourth time. The chances of an item reselling are normally four times greater than a brand new item you’ve just bought.
• Give your vendor a commitment. If you wish to become more valuable to them and see them do more for you, you have to spend more with them. It’s true with your own business too – the customers who spend the most get the best treatment from you. The treatment you get from spending little with thirty different suppliers will definitely differ as compared to spending a lot with ten. This will give you far more leverage. Even if you’re a small store this won’t matter. Vendors aren’t always concerned with getting big sales, but what percentage of your business they are getting. They don’t mind if you are small as long as you are doing as much business as you can with them.
• Pay your bills on time. Will a vendor give more preference to a customer who he has to hound for money or the one who makes it a point to meet his obligations? You know the answer as well as I do! There are so many stores that are slow to pay their accounts that when one actually does they stand out considerably. Honor your commitments and you’ll find a vendor willing to do so much more for you.
David Brown is president and founder of The Edge Retail Academy, a company offering industry benchmarking and management advice to increase profits. If you would like more information on how The Edge Retail Academy can help you control your inventory and add more dollars to your bottom line contact carol@edgeretailacademy.com, call 877-569-8657 or visit www.edgeretailacademy.com.
