If your retail, service, or manufacturing business is to succeed and profit, one crucial aspect involves the ability to identify and form relationships with vendors. Many business owners are content to purchase their merchandise and materials from the same sources year after year. In my view, this is a missed opportunity because all vendors are not created the equally.
So, how do you find vendor sources? If you subscribe to any industry publications you will notice them filled with ads for companies that want your business. Conventions and trade shows are a perfect way to pick up information, catalogs, referrals, and merchandise samples if you take along an extra suitcase. You can contact companies like yours outside your trade area for some great inside information on a particular vendor’s performance. And, be sure to utilize the power of the Internet through key word searches. Owners should determine what factors are most important when comparing vendors. Here are some things to consider. Which vendor stocks the widest assortment of products or services? Is their customer service consistent? What about the minimum order levels, shipping charges, and the delivery timing? Does the vendor stand behind their product quality and have a return or restocking policy? What about credit terms? Will the vendor offer you net 30 credit terms or will they require you to pay cash on delivery?
Now for the most important vendor factor to consider- are they willing to be competitive? Here is a short story. In my former business, I purchased $60,000 of materials per year from a vendor in Oregon. I had enjoyed a great relationship with the firm for many years. But after I returned from a convention in Las Vegas, a California firm called and wanted some of my business. I faxed them a list of all the catalog items and typical monthly quantities. Two days later, I received a return fax detailing the vendor’s pricing and information on shipping, credit terms, and return policies. I compared the two vendor price sheets, and found the California company to be lower on many items.
Here is where negotiation comes in. I called my vendor representative at the Oregon firm and explained the situation. I indicated my wish to continue my relationship with him, but let him know “its just business”. I’m sure you all know what he did next. He lowered his prices to match the California vendor. The result was a $6,000 reduction in my cost of goods for the next year. I call this “pocket money”. It dropped from an expense category on my income statement directly into my pocket. Not a bad return for spending two hours of my time. Remember, in business if you don’t ask you don’t get.