Successful vendor negotiations begin before anyone enters the meeting.
Retailers should understand exactly what they want to accomplish and the economics of the total relationship.
Here are seven questions worth answering first.
- How important are we to this vendor?
Understand your size, growth potential, market position, and strategic value.
- How important is this vendor to us?
Negotiating leverage works in both directions.
- What is the total economic relationship?
Look beyond product cost to freight, terms, rebates, allowances, returns, promotional funding, markdown support, and other economics.
- How is the vendor performing?
Evaluate sales, margin, inventory productivity, fill rates, innovation, service levels, and growth.
- What do we want?
Establish priorities before negotiating. Don’t create the strategy during the meeting.
- What can we offer in return?
The strongest negotiations create value rather than simply redistribute it. Growth, placement, exclusives, marketing, and expanded assortments can all have value to suppliers.
- What alternatives do we have?
Understanding alternative vendors, brands, sourcing options, and products creates perspective and leverage.
Negotiate relationships, not individual invoices
Strategic vendor relationships can create tremendous value for both parties.
The objective should be to develop a relationship in which the retailer receives competitive economics, products, innovation, and support while the supplier has a viable path to profitable growth.
