Last week’s post highlighted a few common errors made when pricing for retail. This week the focus turns to how optimise profitability by negotiating smarter.
Many wholesalers/manufacturers will have different types of discounts – not all of which are widely communicated. Often it is a case of ‘don’t give if they don’t ask’. And why would a rep give away something if it is not important enough for you to ask for it?
Here are twenty things you can negotiate that will either improve gross- or net margins:
1. Trade discounts (% off list price)
2. Quantity discounts (based on volume bought)
3. Seasonal discounts (incentive to stock out-of-season merchandise)
4. Cash discounts (reduction based on when bill is paid based on dating of the invoice.)
5. Slotting allowances (paying for shelf-space)
6. Markdown guarantees
7. Promotional allowances
8. Rebates (refunds from vendor which does not impact markdowns)
9. Payment options
10. Payment periods
11. Credit terms
12. FOB Origin or FOB Shipping point (e.g. centralised warehouse)
13. FOB Destination (with or without charges reversed.)
14. Free/Additional POS material
15. Exclusivity (for an area or for a period of time)
16. Co-operative advertising
17. Pre-ticketing/ tagging/ labelling
18. Packaged for resale
19. Field Merchandising & stock rotation
20. Dating (when the discounts etc. come into effect.) For an example of how to calculate the benefits, check this out. This example shows how a seemingly insignificant 3% early settlement actually translates to >50% in actual fact.
You won’t get everything from everyone – but all the little bits help.