Retail isn’t really about prices, it’s about profits. Adjusting prices is definitely one way to address profits, but the most successful merchants also ask, “what about the wholesale cost of my incoming inventory?”
Meeting your profit goals requires the right margins. Pricing is one part of the equation, but a blind spot for many retailers is what they pay for incoming inventory. Opportunities often abound for merchants who are willing to take risks, be proactive, and shop around.
We’ve put together a few tips for assessing your supply chain:
1. Make your vendors compete
If you buy something from a vendor, make sure you can also buy that same product from someone else. This allows you to compare prices and have your vendors bid against each other. The more options you have, the more leverage you gain when negotiating prices.
Be careful here, though. Supply chains rely on relationships. Being too aggressive or demanding could alienate your vendors and limit your options. Sometimes it’s worth it to pay a little more for excellent service while maintaining a positive long-term relationship.
2. Ask about specials
Just like retailers, wholesalers often have inventory they need to move and they’re willing to take a hit to move it. It never hurts to ask and see if there’s something you can take off their hands. Again, this is where relationships become key. A good contact can let you know when discounts are coming and can tell you what products may be more susceptible to a bit of pushback on pricing.
You’ll want to make sure you are tracking the costs you pay over time. Having that historical data will come in handy. As we mentioned in our guide to timing, “Can I get a discount?,” is fairly weak compared to, “My purchases from you have increased 50% year-over-year for this item. What can you do on the price?” or better yet, “I see by my records that [competing supplier] sold me __ units for $_.__ only 3 weeks ago. Can you match their pricing?”
3. Order ahead
Timing is key when managing your incoming inventory. The further out you can plan ahead, the better the odds of scoring a deal and locking in a great price.
If you have the space, stock up on off-season inventory. Snowblowers are a bargain in June, swim trunks are a steal in January. Just be patient and use as much data as you can to guide your decisions.
Be sure you’re tracking that warehoused inventory as well! Its value still counts as a business expense and having it in your inventory list will remind you when it’s time to break it out and put on the shelf.
Reliability is a wonderful thing. A product that sells predictably and consistently year in and year out is a godsend. It’s the reason you never see a vending machine without a Snickers bar. But it can also be a false security that leads to your inventory getting stuck in a rut.
Innovation is also a constant, and new products can take the market by storm. Just look at the fidget spinner. When it went big, most small retailers didn’t have them in stock yet.
This is why it’s always good to have a section of inventory reserved for what’s new. Bold cardboard displays catch the eye and manufacturers will handle the marketing for you. Be prepared to fail in this area, but every now and then, a product takes hold. You may hit the jackpot on a blockbuster product by taking consistent calculated risks with new inventory.
Once again, use data to guide your decisions. Track sales closely and consistently with software tools like Shopventory that can tell you whether an experiment is a success.
5. Think long-term
As I mentioned above, relationships are key. Too often, wholesalers and retailers forget the fact they succeed together. Your vendors need to make a profit just like you do. But if you go out of business, they lose a reliable customer.
Work on building a relationship with your suppliers and be open with them. A simple Christmas card or occasional lunch meeting can go a long way. People enjoy doing business with people they like. Emphasize the win-win whenever possible, and send other businesses their way.
These kinds of relationships usually end up in mutual generosity and good will. Not only are they good for the bottom line, but they help bring down your stress level and give you an ally.
If that kind of relationship just isn’t possible in your case, you may want to start looking for a new of supplier. Again, a supplier with whom you have a relationship is more likely to give you better product at a better price with better service.
Supply chain management is often neglected, even when it shouldn’t be. A good relationship with your suppliers is key to getting the best price and reducing your stress. Simple processes like ordering earlier, asking the right questions, and even just an occasional kind gesture can help get vendor relations right where they need to be.
But the bottom line is still the bottom line. Use data to guide you here. Gut decisions are helpful, but the numbers need to back them up. Information is power and tools like Shopventory give you a powerful advantage with huge return on investment.
In fact, Shopventory offers plans for as low as 79¢ per day. Right now, you can sign up for a 30-day full-featured free trial of Shopventory with no credit card required. We also back Shopventory with a 30-day money back guarantee. That means a total of 60 days risk-free!
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