Increased volume allows you to not only increase turnover but negotiate your suppliers down on price. And whilst this can be quite an allure for a fledgling business, it often leaves you in an extremely vulnerable situation with your customer. With greater scale you get increased risk.
Understanding Your Terms and Conditions
Most of the big players understand the attraction they enjoy from small business and so manage a lot of the stock risk out of their own business through the terms and conditions they make you sign. The risk then falls on your shoulders as a small business in terms of returned product, reverse logistics, early invoice settlement discount, price promotions etc….all of it ends up being funded through the suppliers margin which is already a lot less than that which you would enjoy from a smaller, niche outlet.
It is very easy to overlook these risks in the excitement of getting your product onto the shelf of a major retailer. I’ve seen many businesses simply sign and return the standard T’s and C’s that a customer sends them (which are usually extremely aggressive) without negotiating.
They are often intimidated by the size of their customer, but there is often a fair amount of concession that the retailer can give you if you argue your case, especially if they want your product that much. Sweeteners such as a limited period exclusivity or a particular SKU that isn’t being sold elsewhere can help you negotiate better terms…and remember if you don’t ask you won’t get!!
