supplier pricing

Disruptions in the retail market over the past two decades have changed the relationships between vendors and buyers. In many industries, the power has shifted a great deal in the vendor’s favor. If you feel like you’re in a weak position with your suppliers, there are ways to strategically gain an advantage.

Provide Value to Your Vendors

Retailers typically set their prices according to the gross margin made on every sale. This strategy varies among different industries, because of commodity pricing and supply chains, but holds true for most, which is why increasing your purchasing power is so important.

Even if it’s just pennies on the dollar, lowering your cost on every purchase increases your margin. The effects of this can increase your cash flow and profits, or those savings can be passed to your customers. Whichever way you choose, your business will become more competitive.

Below are 3 ways you can improve your purchasing power. There are more than three, but these are simple to implement and provide quick results.

1. Consolidate Purchase Orders

Often overlooked by many retailers, the suppliers and vendors you work with may carry more than one of the products you have in your store. Yet, you are only purchasing one item from them. You or the vendor may not even know this is happening.

In order to consolidate your purchases, you will need to audit your vendor list and products. The process should include pricing, too. Then, work with your vendors to see who is most willing to work with you. This can be time intensive, but worth the money you will save on volume discounts.

2. Open New Markets

New products are difficult to sell. And, generating a buzz for them is one of the biggest hurdles for manufacturers. It’s also difficult for small businesses to sell new products, because they may not fit the vision or theme of the store.

This might be an area where these rules can be relaxed a little to allow for an exception. One of your vendors may have a product that needs market testing or entry into a new territory. An offer to help them may come with perks and discounts on your other purchases. Another bonus is the market research you’ll be running on your own customers to see if they do like it.

3. The Power of Many

There are many group purchasing organizations or buying groups that offer member pricing on goods and services that can substantially reduce the costs of your purchases. These co-ops work by using the purchasing power of many businesses, just like yours, in order to get the best deals possible. They may save you 10% or more on your purchases. Each co-op or buying group is different from the next, and have special requirements, so some research is necessary.

Increasing Your Cash Flow

The purchase of goods to sell may represent 50% or more of your total expenses. These purchases can tie up your cash, leading to delays in growth, or even worse—lost sales.

Collaborating with your vendors may be a new way of thinking. The old ways of thinking are slowly fading away. Who can offer the best deal has changed to who offers the best value and profitable relationship. This goes beyond scratching each other’s back. Changing how you interact with your suppliers and vendors may increase your profitability and lead to new opportunities for your business—achieving successful returns for a lasting relationship.

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