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Week 4
Ch 6: Retailer/Vendor Relationships
FM10211 – Retail Operations
FM10211 - Retail Operations 2
Benefits to Retailers
• Lower costs– Fixtures & Signs– Training– Shelf Management
• More expertise
• Benefits to sales associates
FM10211 - Retail Operations 3
Benefits to Vendors
• Closer to consumers
• Closer to sales associates
• More control
• Better sales
FM10211 - Retail Operations 4
Partnership Conflicts
• Difficulties can arise
• Must be negotiated or accepted
• Can hurt relationship
• Variety of problems
FM10211 - Retail Operations 5
Order Cancellation/Merchandise Substitution
• Both vendors and retailers
• Can occur without warning
• Little can be done
FM10211 - Retail Operations 6
Unauthorized Returns to Vendor
• RTV
• For any reason
• “Adjustments” are an alternative– I.e. discounts
• Proper procedure help maintain relationship
FM10211 - Retail Operations 7
Exclusivity
• Retailers may ask to be exclusive
• Can be for a limited time
• Vendors may choose to break deal
• Retailer may not continue
• Does sales level justify exclusivity?– How much?
• Be creative about what’s exclusive!
FM10211 - Retail Operations 8
Ordering• Special Orders
– Orders by retailer for specific customers– Particularly bad if not fulfilled
• Reorders– Previously placed orders– A/k/a standing orders– Vendor may be counting on it
• Minimum Orders– Vendor specified– Retailer may order less but want same deal otherwise
FM10211 - Retail Operations 9
Discounts and Allowances
• Price concessions vendor gives to retailer
• In return for certain retailer actions
• Vendor may not honor
FM10211 - Retail Operations 10
Unreasonable Conduct or Dishonesty
• Builds tension
• Destroys trust
• Vendor/Retailer relationships are often tense and fragile already
FM10211 - Retail Operations 11
Why to Negotiate
• Solve problems
• Resolve conflicts
• Reduce costs
• Improve profit
• Many opportunities– Vendor <> Retailer– Retailer <> Sales Staff
FM10211 - Retail Operations 12
What to Negotiate• Obtaining certain merchandise• Extra markup or markdown money• Transportation and delivery charges• Cooperative (Coop) advertising
– Vendor helps pay for retailer’s ads
• Terms of sale– Discounts, delivery, transport costs
• Dating– Discounts given for prompt payment– E.g. 8/10 EOM = 8% discount if paid by 10th of month
FM10211 - Retail Operations 13
How to Negotiate I
• Act collaboratively, not competitively– Negotiation is about everyone getting what they want (or at least
will accept)– Not about “winning”
• Prepare– Research other party– Rehearse
• Understand going in– What you need– What you can give up
FM10211 - Retail Operations 14
How to Negotiate II
• Make time your ally– Most concessions are given at deadline
• Be willing to take creative risks– Too conservative and other can take advantage
• Focus on long-term goals– Build relationships
FM10211 - Retail Operations 15
Sales Representatives• Represent a manufacturer’s product
• Company/Corporate Reps– Work directly for vendor
• Can be an Independent Rep– Under contract to a specific company
– May handle other (non-competing) lines
• Trend is away from Independents– Less common given consolidation
• One sales call may represent many retailers
• Less expensive
FM10211 - Retail Operations 16
Purchase Orders
• Once sale is negotiated
• Contract between vendor and retailer
• Contains all terms– Merchandise purchased– Terms– Discounts– Etc.
FM10211 - Retail Operations 17
Other Order Types• Open Orders
– Standing order
– Vendor fills when they feel necessary
• Advance Orders– Longer timescale
– Examples: Imported goods, Seasonal
• Back Orders– Full or Partial Orders waiting to be fulfilled
• Blanket Orders– Commitment for later date without all details
Chapter 8
Personal Selling and Customer Relations
FM10211 - Retail Operations 19
Sales and Profit
• Why have a retail operation?– Status?– Something to do?– PROFIT!
• What creates profit?– Selling!
• What should you sell?– Generate the largest long-term profits!
FM10211 - Retail Operations 20
Personal Selling• Direct contact with the customer• Wholesale
– Manufacturer to customer
• Retail– Over-the-counter
• Sales personnel (associates)
– House-to-house (door to door)– Mail
• Fastest growing!• Sales associates• Guest hosts• Telemarketers
FM10211 - Retail Operations 21
Expanding the Customer Base
• How?– Open more stores– New markets– Diversify merchandise assortment– Meet or exceed sales goals!
FM10211 - Retail Operations 22
Retail-induced Incentives
• Compensation– Direct Compensation
• Wages• Commissions• Bonuses• Prizes and Awards
– Indirect Compensation• Non-monetary rewards/Perks
• Recognition– Employee of the Month
FM10211 - Retail Operations 23
Vendor-induced Incentives
• Everything mentioned, plus:
• SPIFs– Sales Promotion Incentive Funds– Added incentive to sell vendor’s products
• Contests
• Training
FM10211 - Retail Operations 24
Training Sales Associates
• Represent company to the customer
• Investment made by company in employee
• Must understand and meet company’s goals
• Policies– Rules for how business is run
• Procedures– Steps to take to reach a goal
• Training can be more than a week!
FM10211 - Retail Operations 25
Formal Training
• Highly structured• May include
– Lecture– Demonstration– Videos– Meetings, seminars, conferences– Role playing– Case analysis
FM10211 - Retail Operations 26
Informal Training
• On-the-job
• Often up to the employee
• Can be problematic– For employers– For employees, too!
FM10211 - Retail Operations 27
Six Steps to Complete a Sale
• Approach and greet the customer
• Determine needs and wants
• Present merchandise/service
• Relay product info/answer questions
• Suggest related items
• Close the sale