Business Calcium Blog

The Art of the Buy: Dealing with Vendors


Are you are launching a retail business? One key part of your business puts you on the other side of the counter, as a buyer of the merchandise you will be selling to your customers. There is a saying in retail that ‘Money is made in the buy’ – the decisions you make as a buyer will determine not just how much you pay for your stock, but the items and lines you carry, and your relationships with your vendors.

Before buying your first item of stock, think about what you can sell it for. Develop a pricing strategy as part of your business plan. Your customers will be looking at price first and foremost, but that is not all they are looking for. High end retailers can and do charge more for the same product than warehouse stores, because their customers are also buying convenience and confidence.

Know your local market and your competitors. If you are selling the same items your competitors are, you’ll have to stay close to the going price. If you have items they don’t offer, you may be able to mark them up a bit more.

Dealing with Vendors
Once you know your pricing strategy you are ready to head into the vendors’ marketplace. Begin by working out your ‘Open to Buy’ figure – your purchasing budget – and when you have worked it out, stick to it. Don’t be led down the primrose path of buying more than you can sell!

Buying is a negotiation, so be ready to learn the art of the deal. And, just like the Boy Scouts, the first lesson is Be Prepared. Vendors have their own agenda: to sell you as much as they can, for as high a price as they can. Your agenda is to buy just what you need, at the best price you can get for it. Make a plan, and make it flexible, but stick to it.

Control the clock. If a vendor says ‘This offer may disappear tomorrow,” don’t be afraid to say you need more time – more often than not, the offer doesn’t disappear, and the vendor will respect you more for holding your ground.

Be ready to say no. The vendor wants the sale as badly as you want the merchandise. If you possibly can, have alternatives ready – the vendor doesn’t want your business to go to a competitor.

Vendors have worked out a host of sales tactics over the years, from the old fashioned hard-sell to working the clock, to playing good cop/bad cop, a salesperson talking sweet while the district sales manager talks tough. Know these tricks, be ready for them, and don’t get buffaloed into going against your plan.

Remember that your word is your bond. Negotiation can be a tricky game, but it is a game both sides can win – if, and only if, your vendors know that they can trust your word, even if your word is ‘No.’

Retail buying is not a one-time game. You will be dealing regularly with your suppliers, building relationships with them. To make those relationships good and productive ones, keep a few tips in mind:

Limit your number of vendors. You want to be important to each vendor, and that means giving them reasonable sized orders and steady business.

Comparison shop. Look for vendors you can work well with, whose sales goals match your own needs.

Maintain your standards. Your customers expect certain things of you when it comes to merchandise quality, service, and warranty coverage. Can you afford to settle for less from your vendors?

Don’t hesitate to re-evaluate. If a once-reliable vendor can’t be counted on so much, it may be time to look for alternatives and move on.

And keep in mind the range of possible vendors, from manufacturers to independent sales reps, back-of-the-truck jobbers, trade shows, and increasingly the Internet. Trade shows are a good place to make your first buy: They bring numerous vendors under one roof, giving you a good overview of the industry.

Question Your Vendors:
Being an informed buyer means knowing what questions to ask your vendors. Here are ten questions that you should expect vendors to answer:

  1. Who else in my local sales area is doing well with the vendor’s line?
  2. What are the order minimums, and can they be bent a bit? Vendors will often accept a small initial order in hope of larger sales down the line.
  3. Does the vendor have promotional or off-price items that are available for less?
  4. Can the item be re-ordered? Repeat business is your bread and butter, but a one-time offer can be a winner if the price and item are right.
  5. Does the vendor have a catalog, or color pictures, that you can provide to employees or post in your store as advertising?
  6. Does the vendor have a website? A website can provide faster pricing and availability information than going back and forth via mail or phone.
  7. Is ‘co-op’ advertising money available? Often vendors will pay you to advertise their products, or provide you with sales racks or other aids. But make sure you and the vendor are clear on what is offered and expected?
  8. What is the vendor’s returns and exchanges policy?
  9. What are the vendor’s delivery dates? Nail these down firmly, with cancellation dates, so you don’t get stuck with deliveries of Christmas merchandise in January.
  10. What are the vendor’s terms of payment? Details of payment scheduling can end up mattering more to your margin than the nominal bottom-line price.

6 Tips for Smart Buying:

  1. If you can, buy in your own store, where you have the home field advantage.
  2. On trips, don’t overload your schedule, so you keep control of the clock.
  3. Your ‘Open to Buy’ purchasing budget – don’t leave home without it.
  4. Never buy on first sight.
  5. Confirm the details of a deal before signing it.
  6. Remember that terms can matter more than price.

What matters most in retail is your instinct for merchandise: what your customers want and how much they’re willing to pay for it. Once you know those fundamentals, the simple guidelines here will help you to be a sharp, informed buyer for your retail business.

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