Knowing your supplier is one of the best tools, weapons, instruments – no matter how you want to call it – to control the situation and always have the benefit in discussions, negotiations, day to day purchasing activity.

“Knowing” the supplier takes a lot of time and work at the beginning. It takes time to dig into the information, to learn all you can about their production capabilities, their partners (basically your competition), their competition; their reputation in the market and the reputation of their sales people and management; logistics and pricing, margin capabilities, service issues, quality issues, the company’s financial strengths and weaknesses, their product’s strengths, the marketing Read the rest of this entry »

One of the many challenges that Internet brought into the retail business is the ease the consumer can compare prices.  This gives an enormous power to the costumers. Online has really brought the true competition into retail business.

The price transparency brings a huge pressure on the margin/ profitability of the retailer. Wall Street Journal debates in this article ways to use in order to limit the number of bargain hunters coming onto your virtual or physical shop.

In a very competitive and open market, price setting has become more complicated than ever.
In this post you may find a few things to take into account when setting your retail prices.

The below chart is showing the clear trend in U.S. retail sales since the start of the recession in 2007.  Also, following the link you can see each year/month spending, also by category.

The minimum was reached in December 2008, while the major negative inflexion point is July-August 2008.

Source: Wall Street Journal – click here to see detailed interactive chart

This very interesting and (somehow) surprising AT Kearney Report suggests a new way to boost sales for low-volume items, applying a new way of thinking in assortment and replenishment. While in the situation when the items do no sell very well usually the reaction is to reduce assortment, the opposite approach – pushing the products into the stores in minimum quantities – has been shown to increase sales and reduce inventories without raising costs!

The approach suggested in this report implies a new way of assortment management, where people in the point of sales invest their energy in what they do best – merchandising and building costumer relationship – and the supply chain is managed in a pure centralized way.

In order to apply with success such a strategy the assortment and stock level of the point of sales has to be 100% managed by central Read the rest of this entry »

After some time spent as a professional retail buyer in different organizations, I became aware of the universal and seemingly never-ending conflict between buying and sales/marketing (operations).

In simple words the whole conflict is reduced to “purchasing did not get us the right product/ right prices” while buyers blame “operations are not capable of selling our wonderful products”.

There are many reasons why this conflict is always bubbling over. It has to do with organizational culture, with the strong ego of company leaders, with the lack clear management accountability, etc.

The one key-word, actually the one key-action everyone forgets about is cooperation.

David Aaker wrote a great book about this organizational internal conflicts and he explains how this so-called “organizational silos” becomes obstacles to effective and efficient development of a strong brand and company.

Aaker uses a silo as a metaphor for “organizational units that contain their own management team and talent and lack the motivation or desire to work with or even communicate with other organizational units.” Organizations must find out how to remove the problems caused by silos without losing the benefits they can provide.

In his book called “Spanning Silos: The New CMO Imperative”, Aaker provides a road map that gets different parts of an organization to collaborate together. His book is full with real life examples, besides the academic and theoretical information.

I consider the below video presentation about his theory to be of great value for any retail professional. I also recommend his book, one of the best I ever read on the topic.

Bargaining, auction or long time partnership? Basically you can reduce all to this question when it is about to consider the value of your business relationship.

Bargaining or auctions to get the best possible prices are not necessarily negative negotiation tactics. But the way you do it may harm the business relationship. So instead of thinking of “if to do it” maybe re-think on “how to do it”.

In a long time partnership with a supplier, bargaining for the prices might not be the best approach as a true partnership will bring you on a long run more value added than one time extra margin or extra sale volume. What you may gain via an aggressive price or commercial terms improvement you may loose on the other essentials aspects of the business.

In order to avoid subjectivism, just put yourself the below questions:

Read the rest of this entry »

Price setting is a common task for any retail buyer; it is a really massive topic to cover. I just want to point out some key elements to take into consideration when deciding the retail price for your articles.

Every category of products has its specifics. There are many significant factors to take into account, starting with manufacturing cost or buying price, demographics of the consumer-target, promotion or campaign for the product, brand awareness, merchandising, packaging, strategy involved (profit oriented or volume oriented), competition, etc, etc.

There are some situations when, after considering all the objective parameters, you have no choice but just go with your gut for the final price.

Branded products prices are usually suggested or imposed by the vendor. MSRP* (or Manufacturer suggested retail price) or RRP* (Recommended retail price) is the way the vendor is setting (or at least trying to set) the price on the market. Easier said than done.

When it comes to price setting the golden rule is: The perceived value of the product should be higher or at least the same as the money value indicated on the price tag.
Second rule, which is originating from the first: the market is deciding the right price and not the retailer.
So, the key point in any price setting is to study well your target market. With experience price setting comes naturally for the buyer/ purchasing manager and this is not typically an issue. OEM** products are one notable exception, here the retailer decides how and where to position his own brands.

The extremes in price setting are obviously positioning to low your price or to high. In both situations there is a lost opportunity:

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The way to make the preparation process easy, intuitive and less monotonous is to split it in 3 clear defined steps. After you do that a few times and you include this in your negotiation routine, it will take (in the often case of a supplier you already work with) an unimportant amount of your time, sometimes up to 20 minutes.

However, as a general rule, take enough time to plan. This may be the most productive part of your negotiation actually. There is no pressure. If you are not negotiating alone, but in a team, prepare/delegate/split the preparation work with your team. If there is a new supplier, then the amount of work involved is obviously bigger. In case of your usual partners, you already know the information, just put it in writing. Don’t hurry, think in deep. This gives you the warranty that you leave at the hand of probability only very few variables.

When you have a new vendor in sight, the number of variables being much higher, documentation work takes a bit more time (also, the strategy and tactics adopted for the first meeting are specific).

Back to our 3 steps:

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I got one excellent feed-back on my previous post that I would like to share: there is another surprising reason why buyers are ignoring preparation. Unexpected or not, this is one of the most human possible causes – preparation seems so insipid compared with the “juicy” negotiation itself! Nobody wants to do boring stuff. So we skip this step or we do it mega quickly because we find the juice only in the game on negotiation. Well, trust me on that: you cannot have the good juice if you do not peel off and wash well your fruits before…

The most important thing about preparing a negotiation is, well, doing it!

Like any other professional with years of experience in negotiation, I learned my lessons during the thousands of hours spent with vendors or business partners. Negotiation is a skill: with good training, a good teacher, some key books and, above all, practice you may become a great negotiator. I noticed nevertheless that most of the books and tutorials are focused a lot on strategy and tactics and less on the first phase, preparation.

Read the rest of this entry »

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