We select our store locations. We select our staff. We select the merchandise to carry; and, along those lines, we select our vendors. Selecting the correct vendors — in addition to managing these vendors during the selection process and beyond — can often be the difference between making your store profitable or simply providing real estate for the vendors to sell their goods.
So, raise your hand if you have ever conducted a thorough request for proposal (RFP) process for your vendors. Anyone? In truth, not many have to the extent that you evaluate multiple vendors, creating competition for space in your store. A well-thought-out process to vendor selection can provide real opportunities for you in the following areas:
Rebates: Did you know that vendors offer rebates based on product placement, rack allowances, product movement and other considerations? The RFP process ensures you identify and capture your fair share.
Incentives: The vendor is in your store for one thing — to sell their product. Meeting the goals of the vendors should only be achieved if they are aligned with your goals. Work with the vendor to establish incentives for each party that foster alignment.
Marketing: Identify programs and investments that your vendor partner will make in advertising and promoting their products. These should be managed in concert with your overall marketing of your store and determined jointly with the vendor to ensure their financial obligation, as well as timing.
Product Returns: Have you established a specific contractual obligation on product or damaged returns? Re-slotting fees and other incremental markups by your vendor with regard to returned products could eat away at your gross profit.
Markups: Every product you purchase comes with a corresponding markup — or the manufacturer/vendor profit. Knowing your industry markup ranges by category will better prepare you in establishing the best cost structure for your product acquisition.
Conducting a thorough RFP process is critical for establishing not only your pricing structure with your vendors but also in developing the process in which business is conducted.
John Matthews, president & CEO of Gray Cat Enterprises is responsible for the management of all consulting activities for the firm, which include retail consulting for multiunit operations, interim executive management and project management. Prior to founding his own company in 2004, Matthews held senior management positions as president of Jimmy John’s Gourmet Sandwiches and as VP of marketing, merchandising, facilities, corporate communications and real estate at Clark Retail Enterprises Inc. Additionally, Matthews worked for nine years in marketing management as the national marketing director of the Little Caesars Pizza Corp.