Profit Partners
Which vendor plans help you make money ... and which can pull business away from you?
By Cinda Baxter -- Gifts and Dec, 9/1/2008 12:00:00 AM
Let's face it: Everyone wants a piece of the pie; storefronts no longer hold the only fork: Retailers are retailers. Vendors are retailers. Fulfillment houses are retailers. Even 12-year-olds with eBay accounts are retailers. Got a computer? You, too, can become a retailer.
As more manufacturers have started selling direct to consumers, more retailers are cornered into competing against the companies that supplied them. It used to be that if a line began selling direct, as a store owner, you had only two options: swallow your pride and continue supporting someone who is competing against you or drop the vendor and walk away from the customer base you've spent years building around them.
Nothing clears decks and minds quite like a slow economy. Savvy buyers now look at each and every line on the shelf, asking one clear, tough question: “Are you working for me, or am I working for you?” Resistant to providing free showrooms for direct vendor competition, the conversation has moved from frustration to determination in fairly short order.
Of course, change brings options, and manufacturers didn't dally in providing them:
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Affiliate programs
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Model Store programs
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Store locators
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Store within a website
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Corporate webstores
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Shopatron
There are more flavors of partnership programs than pies at Baker's Square. But the question “Are you working for me, or …” still applies. Some of these options are good, solid business builders. Some, on the other hand, are rock solid growth killers. And you're supposed to have the time to sort it all out… when?
Each program has its nuances; be sure to consider all factors before jumping in. Here's a breakdown I've put together to help you out.
online dealer listings
What they are: You carry a line. Vendor lists you on its website. Might be searchable by zip code or an alphabetized list by state, city or store name.
What to look for: Vendors who include only legitimate retailers, not home studios or other home-based businesses, since that's promotion of local deep discount competition.
What you need to provide: Reorders. If you pick up the line, but then allow it to sputter, don't blame them if they drop you from the listing.
Impact: Short term, quick visibility. Long term, continued visibility.
Vendor goal: Make it very easy for consumers to locate their offerings.
Good choice if: The products fit your store, the listing is free with no strings attached, and the vendor includes only legitimate retailers.
Bad choice if: The line's a marginal fit, the vendor includes home-based businesses, requires additional fees or insists on mandatory co-op advertising in exchange for the listing.
Bonus round: Ask if they'll link the listing to your website. You want that. High rankings in the search engines aren't built on meta tags alone; the more sites that link back to you, the better the odds of being high up on the Google list. Ask for it. Many will say no; the ones that say yes are golden.
Affiliate (referral) programs
What they are: Loads of affiliate programs exist; most rely on referrals. Say a customer visits your website and sees that you carry Big Cool Paper Company. They'd like to order something from BCPC, but you're not an e-tailer, nor do you have the space to stock all four hundred items BCPC makes. As an affiliate, you provide a link from your website to the vendor's website, where the customer can order the item. In return, you get a 10 percent (or similar) payment from the vendor for the referral.
What to look for: The trap door.
What you need to provide: Your own website linking to the vendor's site.
Impact: Short term, you're offering customers a convenient option. Long term, you're training your customers to shop somewhere else.
Vendor goal: To build in-house sales at full retail margins.
Good choice if: You like losing business.
Bad choice if: You want to survive. The inherent problem with affiliate referral programs is that the first time a customer transfers to the vendor site, you get a sliver of the money you would have made if they'd come to your store. True, they might not have found the exact item originally sought after, but at least you would have had a chance to help them find something else or place their special order. By leading them directly to the vendor, you've handed that customer over. Next time Mrs. Smith needs something from Big Cool Paper Company, she's not going to come to you; she's going to head straight to BCPC.com, cutting you out of the loop entirely.
Model store programs
What they are: The most recognized is Crane's, although other vendors provide similar programs. With the aforementioned company, a store signs an agreement committing to a buy-in of the line including specific introductory inventory, and an assurance it will present the line in accordance with company standards. There are sales goals to meet — sometimes by date, sometimes by product category. In return, a percentage credit is issued to your account for the following year. Additional perks may apply, depending on the specific program.
What to look for: Solid product you know you can move a lot of. At least 90 percent of the initial buy-in product should be a perfect fit; otherwise, you're spending a lot to buy things you'll have to clear out later.
What you need to provide: Depends on the company, but most will include at least a one-year commitment with specified sales goals. The initial buy-in is typically significant, in order to provide a full selection of the line.
Impact: Short term, visibility on the vendor's website, and in some cases, a special logo, window cling or shelf sign. Crane's programs also include four color window banners and POP materials. Long term, if the line's a good fit for your customers, this can be a great way to increase revenue.
Vendor goal: Build market share by partnering with goal-oriented retailers.
Good choice if: The vendor provides a broad selection of product that fits both the program and your customer. The Model Store designation shows customers you're a quality retailer, while providing additional marketing materials to aid in building sales. You need to stay on top of your numbers to be sure you re-qualify. Typically, this is the rep's responsibility, but you need to be on top of it to avoid coming up short on December 31.
Bad choice if: You doubt the initial buy-in inventory will be easy to move, or if the remainder of the line will require serious cherry-picking to stock your shelves over the long term.
Bonus round: If you have a great rep, you'll be even greater partners as a result of this type of program.
Next time in Retail Enabler: Three creative alternatives that win all the way around.
We would love your feedback!
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