How to Properly Fill Out the Forms from Retailers
Understanding the numerous and often confusing terms when filling out retail set-up forms can be very overwhelming. If you are fortunate enough to have a major retailer accept your product for sale in their stores, you will be sent various forms to fill out. Basically, you must know how to properly complete them and understanding and negotiating the many terms and phrases is the key to quickly obtaining that coveted Purchase Order! Often, retail buyers assume you know what many of the terms mean. Some of these include co-op allowance, guaranteed sale, ad allowance, chargeback allowance, slotting fees, placement fee, and EDI capability. The buyer may have already asked for your price for the product you are offering. If you gave the buyer your absolute best price in order to encourage them to buy, you may be in trouble. Of course, the goal of being in business is to earn a profit. If your quoted price allowed you to earn just a tiny profit, or worse, break even, then you may actually lose money on the deal as the buyer is now asking for “financial assistance” in order to secure the deal when he asks for allowances and concessions in the set-up forms. Buyers know that they can often get you to lower your price. They will often wait as you may have to quote them a “firm” price early in the negotiating stages. Then, they hit you with these extra requests for price concessions. What do you do? Losing money shouldn’t be an option, even at the expense of finally landing your first major retail account. No exposure is worth losing your shirt over. Here is what you need to do and be aware of:
Ask the buyer if he needs any concessions before you quote a firm price
Before you quote the price, ask him or her, and don’t feel awkward about it. This is a dance so to speak. Don’t let the buyer lead the whole way. If you don’t ask, you will be the loser. They win. Some of the most common requested allowances asked for by a buyer are co-op (advertising fund) and defect allowances.
Concessions are negotiable. Most buyers look for about 5% for assistance with advertising. My experience has almost been that they will accept 1-2%. When filling out the product info forms, just put in 1% and see what the buyer says. Often they say nothing and you just saved yourself a lot of money.
Buyers are told to ask for these concessions. They are often a profit center for the retailer. They make enough money and you need to make enough money to successfully grow your business. Saying no to most or all of these concessions will not spoil the deal in many cases.
Reserve a percentage you can live with. In order for you to make a profit and to satisfy the buyer intentionally leave some money aside so you can create this win-win scenario. For example, if you wish to earn $20.00 for each widget you sell, leave a few dollars of room so you can give some concessions. Example – your “bottom” selling price is $80.00. Start with an offer of $100.00 to the buyer. If the buyer insists on a collective 10% for various concession, you will wind up settling on a price of $90.00 – $10.00 more than your bottom price. You should attempt to negotiate the 10% request from the buyer and counter with 5%. If he agrees, you now get to keep an addition $5.00 per unit for a total profit of $15.00! Not bad! It is always important to remember that your offer price in the beginning of the negotiations is and has to be a competitive price in your industry.
There are many terms and conditions you need to be aware of and learn about before filling out these very important forms. More importantly, understanding which concessions are truly important to the buyer may potentially save you thousands. Sometimes, buyers will not negotiate these concessions and may even require them so always price your products appropriately and be ready to haggle!!
Good luck!
Jim