Small Business Tip - Negotiate with suppliers

steve's picture

Far too often small retail shop owners focus exclusively on the sales side of the business, missing out on the fact that successful retail stores can sell items cheaper but still make higher margins. How? They get better prices from their suppliers and distributors. And the beauty of lower costs is that you get higher margins without raising prices on your customers.

Learn the incentives of the sales person
This is an easy tactic you can learn even if you are a small store or a brand new customer of your distributor. Distributors typically have incentives and targets for their sales force, sometimes this will be a certain sales volume but other times it will be specific products or brands. When you are placing an order there are specific products you are looking for, but try and figure out what your supplier is motivated to sell, you may be able to get better prices on the product you need if you can help them out by purchasing the product they are being asked to push by their sales manager. I worked as a purchaser for a large warehouse and discovered that certain distributors would take a bath (basically 0 margin) on the product you needed if they knew you could help them sell what they called "focus products". I learned to find out in advance about the products they would be "focusing on" in the coming month and then purposely bleed our inventory down on that product and any other items we normally purchased from the company. Then when the time came for my sales rep to ask me to purchase some of their "focus product" I would hit him with a huge list of stock we needed to order, meanwhile he would be asking me to consider buying "100 pieces" of the product his manager wanted him to peddle. Having dwindled my inventory to nearly zero I could easily tell him I was willing to take 200 pieces (double what he wanted) as long as he could get me the best pricing on the 200 pieces as well as the other product on my order, I would then tell him to get back to me with pricing on the whole order (not sounding too desperate for the product at all).

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