Buyers Market2 Dec, 2001 By: Ronelle Ingram imageSource
economy, stock market profit taking, fear of domestic uncertainty, call it what
you will, most businesses are tightening their belts. The free spending attitude
of the nineties is gone for the near future. Now is the time to take a closer
look at your purchasing habits. Before long, cost and selling prices no longer
have an appropriate relationship. As the Unites States and world economy moves
downward into a recessionary spiral, it is time to re-exam the cost and pricing
on the products you re-sell and use in your business.
the office equipment business, the listed “retail” price is often considered
to be nothing more than a line item in advertising material, rather than a
marketable selling price. Many sales reps cannot remember the last time they
sold hardware at the full listed retail price. Instead of reminiscing about the
good old days, use the tightening economy as a steppingstone to greater profits.
Take the time to re-examine your company’s purchasing habits. You can actually
bargain with our vendors. The dealer buying wholesale, can use price and
comparison shopping to your company’s advantage.
the day-to-day running of your business, you may sometimes forget to actively
monitor the cost of our purchases. Someone in your company; service manager,
parts manager, purchasing agent, or owner is responsible for acquiring needed
parts, supplies, and equipment. Too often, the person who actually makes the
buying decision is not inclined to regularly check your vendor’s prices or ask
for a better value.
some organizations, the computer system makes the buying decision. When the
on-hand stock reaches a certain level, an automatic repurchase order is created.
A receiving clerk acknowledges the arrival of the order. A purchase order is
then cross-referenced to the received order. If there is a difference between
the cost of the product and the referenced price on the invoice, an accounts
payable clerk adjusts the purchase order. Then the vendor’s invoice is
processed and a check is produced to pay for the order. At some point, clerks
and computers are merely tracking prices. Somewhere along the line, the buying
process has become automated, thereby the cost accountability has slipped
through the cracks.
wholesale cost that your employees use to price a product, may be regularly
updated by your computer system. This type of software program automatically
updates or price averages to account for changing wholesale costs. What happens
to the printed sales list that has not been updated this century? How are cost
increases passed on to your maintenance agreement customers? Who is aware of
price increases on regularly purchased products?
With Your Vendor
time and energy required to do educated bargaining will vary from product to
product. There is a broad line between spending hours of research and bargaining
to attain a 50% savings on a $3.00 bearing and receiving a 20% discount on a
$10,000 drum order.
is a good business practice to regularly examine all your purchasing
relationships. Make a habit of approaching each of your major vendors twice a
year. For those who do not feel comfortable with person to person
“bargaining,” there is a painless alternative. Ask your vendor to re-exam
your buying patterns. Sometimes it can be as simple as asking, “Is there any
way I can alter my buying patterns to increase my discount levels with your
company?” In most cases, you will be amazed at the discounts your vendor will
offer you. Before you place a large order, ask if there are any specials or free
freight programs that are currently available. Ask for a multi-item discount
price quote. You may only want to buy one item, but it costs nothing to ask.
Once the rep quotes a discounted price, you know there is room for negotiation.
You can agree to pay the regular price today. Ask to receive the multi-unit
discount when you purchase this product again.
a working relationship with your vendors. Whenever possible, try to help your
vendor’s rep achieve their own goals (most reps have monthly, quarterly or
yearly quotas). You can become their working partner. Ask if you can receive any
additional discounts if you order “today.” Some vendors will even allow you
to place an order you don’t want filled. You may be able to receive special
price consideration for giving a purchase order number for items that won’t be
shipped for 90 days. Ask for net 90 days to pay for the product. It’s a
win-win situation and all you need to do is ask.
the Internet as a resource to find a product’s base selling cost. Then call
your regular vendor who actually talks with you, provides you with personalized
service, product information, industry gossip, that exhibits at trade show such
as ITEX or other industry gatherings and has become a professional friend. Share
the Internet price with your rep, and then ask for their best price.
am willing to pay a little more than the raw price I have located on the Web. By
openly acknowledging the low-ball, Internet price, I make my vendor aware that I
am an educated buyer. It is my vendor's responsibility to keep me as their loyal
Back-Up And Group Buying
new vendors appear in the market place, try to balance the advantage of a lower
wholesale price versus working with a trusted business partner. Consider the
cost of setting up a new vendor, the need for filling out a credit application
or processing a C.O.D order. Can you trust the product you will receive from the
new vendor? How can they offer a similar or superior product, for a lower price
than your current vendor? It is always worthwhile to have a secondary vendor for
products you regularly use. Back-orders, companies going out of business,
defective products, credit problems, freight delays due to weather, etc., can
interrupt the regular flow of any business. Having a backup vendor is a
practical business resource. It also keeps your primary vendor competitive.
am acutely aware of the need for all businesses to be able to make a profit. My
wholesale vendors need to make a profit on me, as I need to be able to make a
profit when I resell this product to my customers. All three parts of this
triangle of success (distributor,
wholesaler, and end-user) must be in place to make the business cycle
successful. There are still regional and national buying groups that offer the
power of group buying discounts to their members. When I joined IBPI
(International Business Products Inc. (Phoenix, AZ 602-787-9785), I was able to
decrease my cost of wholesale products without ever having to ask. As a IBPI
member, I automatically receive deeply discounted pricing and yearly rebates.
an active participant in industry’s events enables you to meet current and new
vendors. Expositions, conventions, and educational events are an excellent venue
to compare products and pricing. Often special pricing is offered at these
industry gatherings. If it is not practical to make a purchase at the show, ask
for an extension of this discounted pricing. If immediate purchasing of the
products is not needed, use these pricing points as a benchmark for future
an open, respectful, mutually profitable working relationship with your vendors
is a Win/Win partnership. Inquire about the availability of special deals, free
freight, or multiple order discount. Be an educated buyer who is willing to pay
a fair price while receiving added value. Always ask your vendor to add value,
not cost. Use subtle bargaining practices as part of your business arsenal to
maximize profits. Use the downturn in the economy as a catalyst to increase the
profits you can achieve through smart buying habits.