Okay, so I quoted myself! There is a first time for everything. I could not find a famous person to quote that drove home what I want to share today. I have the vantage point between many people engaged in the end buyer sales process of the industry and I have a great business and social relationships with some of the top vendors. I get to see both sides of the day to day business. I regularly hear about people trying to make their profit on the buy – trying to get lower and lower nets from vendors. There are several problems with this approach.
Generally vendors (suppliers) in our industry price at the lowest amount they wish to do business at for most transactions. Those that offer special pricing for large quantity orders or to distributors with excellent payment history are also generally offered to all who qualify. When a supplier is asked to go beyond that point, several things have to be considered. Is the distributor usually a good profitable partner or do they always want more? Do they pay on time? Will producing their low margin order use inventory you can sell at normal margin? Will the labor used to produce the low margin job be worth it? Has the distributor “partner” consistently provided marketing support for your line?
If there is in fact a great partnership, additional pricing reductions may be perfectly warranted. But when vendors are pressured to give lower priced for fair weather partners, future business together will be impacted. When the distributor needs a favor to get their fat out of the fire (quicker production, help to correct a distributor mistake, etc.) there may well be a reluctance from the supplier.
Partnership in this industry it is essential. Suppliers and distributors share a common customer. While the movement of money suggests that the distributor is the customer of the supplier, that is not true at all. Distributors do not buy goods from suppliers, they sell them! Orders are not given to suppliers until the goods have been sold to someone else. So partnership is the only way to make this business work.
Distributors that are candid and fair with suppliers and will reduce their profits along with discounts from the supplier to win the business will find that suppliers will happily participate in that partnership. But distributors that get a reputation of always expecting concessions will see their quotes adjusted so that when the dance is over the supplier has a reasonable profit. News flash – suppliers are smart people!
So what is a partnership? It starts with understanding the shared customer concept. Suppliers have to be able to trust that distributors will handle the money properly and pay them on time – but realize the distributor is not the customer. When things go wrong there needs to be an honest evaluation between partners and an equitable solution. It is not always the supplier’s fault. It is not always the distributor’s fault!
Think long term. This is an industry the lives on reorder business. If not the same programs/items but the same customers. Don’t short circuit yourself by allowing a single order to interrupt the partnership. If a vendor can’t go lower and you want the order, drop your profits! Ouch – I could hear most of you groan. But in a partnership it can’t always be one sided.
Suppliers – When asked for a quote, give the lowest price you are willing to do the business for and stick to it. If the order goes to a competitor be happy they are losing money on it and not you!
Distributors – If you can find ways to support the suppliers (distributing sales literature to salespeople and customers, using PSAs from your top supplier, etc.) – Just do it! If you have a website and/or publish a catalog, promote supplier’s items without looking for co op dollars. Be a real partner and you will find greater profits, easy relationships, amazing cooperation and special treatment.
Suppliers have the responsibility to produce great items with high quality imprints. Distributors, your part of the partnership is to make the transaction about the customer’s objectives and not about price. If you do your part your profits and the profits of your supplier will be protected and your customer will actually get a much better value for their investment. If you make it only about price, eventually you will win the race to the bottom.
Gregg Emmer is chief marketing officer and vice president at Kaeser & Blair, Inc. He has more than 40 years experience in marketing and the promotional specialty advertising industry. His outside consultancy provides marketing, public relations and business planning consulting to a wide range of other businesses and has been a useful knowledge base for K&B Dealers. Contact Gregg at gemmer@kaeser-blair.com.