Some people really live for bargaining and negotiating, feeling a thrill when they score a favourable result. Others hate the idea entirely, preferring to avoid potential conflict or related tension altogether. Unfortunately, bargaining in business is simply part of the bread and butter of developing contracts and relationships between companies, especially between retailers and their suppliers. So it’s best to understand how to bargain effectively and practice it often if your business is retail-based.
Going in to discuss a new supply agreement with a wholesaler or revising an existing doesn’t need to be a big scene like some movie of an 18th-century outdoor food market. However, there are a few basic rules to follow to ensure your business not only understands what’s involved but also what to stay firm on and what to compromise. The result should provide your business with a relationship that fits your price range and needs far better than just taking the first offer given.
Do Your Homework - Know your Wholesale price Expectations
Nothing sets up a business faster for being charged too much or getting the wrong services than where the business has no idea what it wants from a wholesaler much less how wholesaling works. Being informed and prepared for negotiation discussions means knowing the background of the supplier, its size, how many clients it has, the type of supply and product offered, and what types of customers it usually serves. This sort of homework also helps gauge where one supplier sits in pricing versus another, which can be helpful in negotiating a lower price for new business. Homework research can also identify players with a pattern of problems who should be avoided altogether as a wholesale supplier.
Don’t Make Things Up
If your business is going to share projections and operational data with a wholesaler to pin down terms of inventory need and distribution, don’t make things up. Often, managers will try to inflate figures or data to make themselves sound more important, hoping that will then leverage a lower, agreed-on price. It doesn’t work because eventually the discrepancy gets exposed. Further, it shows the supplier that as a buyer your business is willing to lie, which doesn’t do well for a relationship based on trust as well as a contract. That said, a bargain is as much what is said as what is not said. You don’t need to tell a supplier your whole life story. Use facts carefully to bolster your negotiating position and omit what doesn’t help.
Detail Your Profit Potential
If you have the ability to show where your business is now and where it will be with a supplier relationship, that’s a good leverage position to work out favourable wholesaling details and pricing. The fact is, without your business growth that supplier is not going to see that business materialize. So, the more he helps your business meet the requirements of a new contract or big purchase order, i.e. the Wal-Mart success effect, the more dollars he will see that the supplier didn’t have before.
Don’t Forget Incentives
Many suppliers offer incentives for moving more product and inventory to buyers. However, they won’t always offer these proactively if they can get a customer to agree to higher pricing out of ignorance. So make sure when negotiating to ask about what incentives exist and build them into the agreement. It’s an already-offered discount from the wholesale company, so there’s no sense ignoring free savings on the table.
Don’t be rude or threatening but make it clear that your business is also considering competitive suppliers. This will perk up a wholesaler’s ears because if it’s a sure thing that you will be giving somebody your purchase, the supplier will definitely want it to be his business if at all possible versus a competitor. No one likes to give up market share unnecessarily, especially in the same neighbourhood or market region.
The whole point of a good retailer-wholesaler relationship is that both parties get the best outcome so that they can both profit from the arrangement. When one party doesn’t play fair and somehow ends up with an outrageously better position in negotiation, it doesn’t bode well for an agreement being finalized much less lasting very long if it does. In some cases, one party or the other may not feel he has a choice but to agree due to external forces, but eventually, that disadvantage player will find a way out of the situation quickly, causing a loss down the road. Fair agreements firm up relationships to last for a long time because they end up being a win-win agreement for all involved.
Negotiate for the Future
Too often, a retailer will go into bargain for a supply contract only thinking about immediate needs. Then, a year later, the talks start over again because changes or growth have occurred and new needs have manifested. Long-term planning incorporated into bargain can solve these issues ahead of time so that the relationship is ready to deliver changes in supply when needed later on.
If nothing else, your negotiating should be done with patience. Don’t enter into bargaining with a wholesaler when you’re already jammed and need a result right away. It’s better to just do a onetime purchase to alleviate the immediate pressure. Good agreements come with time and attention to detail as well as planning all the impacts before they occur.
Related Reading Material: Wholesale Supplier Relationships