Retail: Vendor Relations & Purchasing
The landscape of the retail industry changes from one month to the next. As new product trends surface, others fade into the shadows of the clearance rack. For this reason, business owners must keep their shelves stocked with highly-desired, up-to-date merchandise. The stores with the most fluid inventory circulation tend to keep the checkout line elbow to elbow. Before cashing out customers, however, retailers must deal with the lifeblood of the industry: Vendors.
Vendor Relations: The Value of Friendship
At the end of the day, establishing an effective product cycle starts with good vendor relations. Industry pundits stress a few basic tips to select the right supplier.
- Up close: Some retail aficionados recommend contacting the vendor and inviting a representative to personally visit the store. In too many cases, a manager fills out the order form, the delivery personnel drop off the supplies at the back door; and that represents the extent of retailer/vendor relations.
Through holding a face-to-face meeting with a vendor representative, retailers can introduce the supplier to management and other employees, set up a schedule for store demonstrations, and/or negotiate product placement in return for price reductions. In any case, the vendor wants to sell their products as much as the retailer. Discussing sales strategy and setting up a formal contact will allow both parties to move closer to that goal.
- Honesty is the best policy: Retailers should always express to the vendor exactly what they expect in the way of services. Many businesses actually devote a separate section of their websites solely for this kind of supplier communication. On these pages, the company usually lists a set of qualities they desire in a vendor. These might include:
- Financial viability
- Value added services
- Strong ethical standards
- Quality control and standard operating procedures
- Flexible delivery schedule
- A basic understanding of the retailer's business
Essentially, outlining expectations helps to better ensure the vendor fully understands and accepts the retailer's code of business conduct.
- Let them come to you: Traditionally, retailers have searched for vendors by referral and word of mouth. Today's technology, however, makes it so the supplier often seeks out the retailer instead. After all, they are the ones providing the service.
Many store websites include a section specifically for vendors interested in conducting business with that operation. Online supplier registration allows vendors to get their portfolio in front of a retailer in a matter of minutes. This tool lets businesses keep a digital profile of many potential suppliers. The virtual registration forms usually request that the vendor lists experience, capabilities, standards of business, etc.
In certain situations, the supplier may update their profile over time by accessing the portal. Ultimately, a compilation of online registration forms serves sort of as a bidder's database.
Purchasing: The Buying Game
While not all retailers sell the same items, one common bond unifies the industry. When the racks, shelves or stockrooms start to become barren, management must place an order. A number of businesses apply the following rules of thumb to their purchasing procedure.
- Don't base your decision solely on product cost. Many retailers warn against bouncing around from one vendor to the next in an attempt to find the lowest price at the time of the order. Since suppliers routinely offer deals to keep up with competition, this only looks to make the job of purchasing merchandise more hectic in the long-run. Instead, experts say stores should select suppliers based on product quality, delivery performance, experience, etc.
Once a store finds a dependable vendor, they should stick with them for the long term. Suppliers often appreciate loyal retailers and usually are more flexible with price and scheduling in order to retain fixed business.
- Perfecting the transaction system. Some retailers have established a competent core of vendors, yet feel something is missing when it comes to maximizing value. For businesses faced with this issue, profit improvement firms offer services designed to scale back inventory spending. Utilizing auditing techniques, and often proprietary software, these firms work to identify lost profits related to overpayments and/or under-deductions. In some cases, it might be as simple as comparing vendor shipping patterns.
Nonetheless, the goal is to trim costs Profit improvement firms tend to focus on validating and recovering the money. With an eye on the client's bottom line, they help retailers activate internal controls to track financial performance. In addition, they strive to establish strong working relationships between stores and their vendors.