How do you tackle the issue of buying price?

[Lucan Unlordly]

You spend £15-£20k pa with a supplier over 10 or more years and believe you are getting a decent loyalty discount off trade of 25%.

A new kid on the block sets up in direct competition and is able to sell at the same price?

I'm mindful that conveying my anger and dismay towards the Sales Director, who's due to call in next month, may not be the best approach. We need their goods.
How would you approach the situation?

(I have thought about saving dozens of empty but taped up boxes with other suppliers names on, sticking them on pallets, filling every shelf, to give the impression they are the smallest fish in the Pond!.................because we get better discounts from others!)

 

[MBE2017]

I had a similar thing happen. I talked to my suppliers top guy and mentioned he had not increased my discount for a long time, a period during which I had spent £x. I mentioned my new competitor being offered similar terms to myself and got an extra 10%.

That said, I prefer not to compete on price, so I kept my rates the same and also kept the extra profit.

 

[Porky]

@Lucan Unlordly have to say that would royally p@ss me off also. Just about sums it up now how it is , no loyalty and we see it a lot.

Of course it is possible that the new guy is not getting the discount you do and has cut his profits back to price match what you offer? Although suspect you are right, rep just wants to maximise sales in your area regardless.

Certainly worth keeping your cool, and as as @MBE2017 says, having a conversation about loyalty discount being increased when you see them. Nothing to lose.

Good Luck.

 

[MOIC]

Time change, perhaps a few years back suppliers introduced a discount system, based on loyalty or amount spent annually or an individual order. Nowadays, in order to get customers, businesses need to quote the lowest price, as people tend to research suppliers, prices and terms. . . . . and choose the cheapest (mostly).

Negotiate, based on your years of loyalty and order values. They won't want to lose you.

 

[ctrlbrk]

You spend £15-£20k pa with a supplier over 10 or more years and believe you are getting a decent loyalty discount off trade of 25%.

A new kid on the block sets up in direct competition and is able to sell at the same price?

I'm mindful that conveying my anger and dismay towards the Sales Director, who's due to call in next month, may not be the best approach. We need their goods.
How would you approach the situation?

(I have thought about saving dozens of empty but taped up boxes with other suppliers names on, sticking them on pallets, filling every shelf, to give the impression they are the smallest fish in the Pond!.................because we get better discounts from others!)

In negotiations the more you know about your counterparty the better. I would find out as much as possible about my supplier and competitors - even hire a PI maybe, given the sums you mentioned involved are not trivial.

Once you have more information you are better positioned to negotiate from a position of strength.

 

[Chris Ashdown]

Before you go out on your high horse, how do you know he has not spent a much as you on the goods equalling your 15-20k pa, why should the discount only apply to you, are you dealing with a large company or small one, 20k is not that great amount, I was spending about 150k with a large company and found it hard to compete with other retailers who must have got equal or better terms although we were given good payment terms

 

[SportsTrophyUK]

Have to agree with the points above. How many years you've been a customer has little to do with it. Your spend is the main factor and you never know how much your competitors spend with the same wholesaler.
My suppliers do an annual review in December with discount rates communicated in January so find out if your suppliers do an annual review and when.

 

[Lucan Unlordly]

Before you go out on your high horse, how do you know he has not spent a much as you on the goods equalling your 15-20k pa, why should the discount only apply to you, are you dealing with a large company or small one, 20k is not that great amount, I was spending about 150k with a large company and found it hard to compete with other retailers who must have got equal or better terms although we were given good payment terms

I'll respond to your reply first Chris, as it will answer some of the comments from others.
The company is the biggest in it's field offering a niche product broken into several smaller niches. We and the new kid on the block work within one of the smaller niche sectors. £20k is a significant spend in the scheme of things.

We track the stock levels of our suppliers. They have 300 in stock, we buy a hundred, 3 weeks later, they have 175 in stock. Good old social media shows the 25 being displayed on our competitors page. I know they are not spending anywhere near what we are.
Incidentally, their selling prices for goods from other suppliers from whom we get good discounts, are higher.

 

[Lucan Unlordly]

In negotiations the more you know about your counterparty the better. I would find out as much as possible about my supplier and competitors - even hire a PI maybe, given the sums you mentioned involved are not trivial.

Once you have more information you are better positioned to negotiate from a position of strength.

I know a lot about the counterparty but am mindful that our supplier will take offense at me telling them who they should, or shouldn't be supplying.

 

[Scott DLE]

Have you thought that it might be the new kid on the block has lower overheads or a more streamlined system? They might not need to same margins that you need to cover all their costs. Just a thought btw!

 

[ctrlbrk]

I know a lot about the counterparty but am mindful that our supplier will take offense at me telling them who they should, or shouldn't be supplying.

I wasn't suggesting that.

 

[Lucan Unlordly]

Have you thought that it might be the new kid on the block has lower overheads or a more streamlined system? They might not need to same margins that you need to cover all their costs. Just a thought btw!

I actually know that isn't the case and as price is at the forefront of our offer they will have to be getting a similar discount just to stay alive.

 

[Fagin2021]

You have a choice of approaches…

The confrontational: “John, why is that bozo down the road getting the same discount as us ? Doesn’t it mean anything that we’ve been your £20k a year customer for the last decade ?”

Outcome: Raises hackles and provokes a defensive response.

The collaborative: “John, we’ve been your customer for over ten years and have always enjoyed a good relationship. In the current economic climate we’re having to look closely at our costs across all areas of our business. Is there some way you can help us – perhaps with a bigger discount on our purchases ?”

Outcome: Opens the way for negotiation.

It’s a good idea to think of anything you can offer in a negotiation that might save them money eg. fewer larger orders versus many smaller orders, prompter payment terms, mentions/reviews/adverts/editorial on your websites and so on.

Can they offer you anything aside from discounts eg. help with or contribution towards marketing their products.

Also, do their reps/sales teams have monthly/quarterly/annual targets to achieve. It’s amazing how many sales organisations will eat their babies (give big discounts) when target time arrives.

 

[cjd]

You could always ask your account manager how he thinks this guy can sell at that price? Then talk about relationships and long-term business. £15-20k per year is very small beer though - first rung in most wholesale ladders, unless they're breaking new ground.

But in any eventuality, it always helps in negotiation if you have an alternative supply offer. If not then it's a seller's market.

 

[Byzantium]

Find another supplier.

If you speak up and you get a better deal, your research into an alternative supplier will still be educational.

If you don't get a better deal, you will need the new supplier.

 

[Lucan Unlordly]

You could always ask your account manager how he thinks this guy can sell at that price? Then talk about relationships and long-term business. £15-20k per year is very small beer though - first rung in most wholesale ladders, unless they're breaking new ground.

But in any eventuality, it always helps in negotiation if you have an alternative supply offer. If not then it's a seller's market.

So, if for example a leather goods manufacturer was selling coats, luggage, handbags, holdalls, wallets, purses and gloves, and we were just selling 20k worth of black gloves pa, it's small beer?

The difficulty is that there are no alternative suppliers. Similar yes, the same no....

We have moved a little more to recommended products for regular customers who don't like or don't have the time to search and buy online. We effectively tell them what we've got and could push them on to other suppliers goods. Not ideal, but a possible bargaining tool?

 

[japancool]

Do you want to burn bridges? If so, go in with all guns blazing.

If not... sit down to have an adult discussion. Explain what the issue is and what you would like.

and we were just selling 20k worth of black gloves pa, it's small beer?

Yes. If the black gloves are 0.1%of their turnover, they can live without your 20k - because ultimately, if you don't buy them, your competitor probably will, and they know that now.

 

[LPB 123]

The difficulty is that there are no alternative suppliers. Similar yes, the same no....

Tread carefully then

 

[Lucan Unlordly]

Do you want to burn bridges? If so, go in with all guns blazing.

If not... sit down to have an adult discussion. Explain what the issue is and what you would like.



Yes. If the black gloves are 0.1%of their turnover, they can live without your 20k - because ultimately, if you don't buy them, your competitor probably will, and they know that now.

I won't be burning any bridges.?

It may not have come across but the competitor probably won't take up any shortfall. In 5 years time they may be in a position to do so. In fact the nub of the problem is that discounts look to have been given for potential as opposed to track record.

 

[SillyBill]

I can only comment on my own business/market, I run a several £M company and have had issues/run ins before with accounts that think their spend with us warrants more than the very good price they've had since day dot. This is prevalent when dealing with micro companies in particular. A £20k spend with my business likely nets me less than £2k by the time it hits the bottom line, of which I pay significant tax on that. Perhaps I'm fortunate but if someone starts making waves over an account that size; that personally enriches me to the tune of not much more than a £1k then it simply isn't worth the bother when I have accounts spending £1M a year. A lot of work may be done for that as well as stock liability etc. And there simply isn't much margin on the table to trade away in my experience, you go in keen for all business these days. Fat margin accounts are few and far between.

 

[MBE2017]

As with anything, a lot comes down to relationships IMHO.

If you have the MD’s mobile number, have eaten and drunk with him, can recall him on a first name basis from memory, you probably know him well enough to ask, and also take it well if refused.

 

[Mr D]

You spend £15-£20k pa with a supplier over 10 or more years and believe you are getting a decent loyalty discount off trade of 25%.

A new kid on the block sets up in direct competition and is able to sell at the same price?

I'm mindful that conveying my anger and dismay towards the Sales Director, who's due to call in next month, may not be the best approach. We need their goods.
How would you approach the situation?

(I have thought about saving dozens of empty but taped up boxes with other suppliers names on, sticking them on pallets, filling every shelf, to give the impression they are the smallest fish in the Pond!.................because we get better discounts from others!)

Its common enough in retail that a new business matches or undercuts a price they see competitors using.
I can think of several suppliers that I have used that deal with standard discounts for all but their biggest customers. Are you a big customer to the supplier or merely one of hundreds? If big enough then negotiate.
The competitor may continue to match your price regardless.

Over the years have seen hundreds of retailers sell for what I would consider below cost. Big pockets, business is a game to them, lack of understanding of pricing needed, better cost control - no way of knowing unless someone blurts out the information (rare).

 

[Lucan Unlordly]

A £20k spend with my business likely nets me less than £2k by the time it hits the bottom line, of which I pay significant tax on that. Perhaps I'm fortunate but if someone starts making waves over an account that size; that personally enriches me to the tune of not much more than a £1k then it simply isn't worth the bother when I have accounts spending £1M a year.

I take your point if setting our £20k spend against your multi million pound turnover, but the suppliers we deal with are turning over considerably less. They thrive and survive on small orders from multiple customers. Our £20k does, I believe, make us the biggest spender within the niche that we serve.

If you have the MD’s mobile number, have eaten and drunk with him, can recall him on a first name basis from memory, you probably know him well enough to ask, and also take it well if refused.

I deal with the sales people and get a once a year visit if lucky, or requested. I don't do the networking thing. We buy they supply, we pay our bills on time, every time. That should be enough to expect a reasoned conversation.

I'm putting a few things in place to reduce our spend and give a little stress to the competitors pricing points. I may get a visit and a free lunch then..........?

 

[Lucan Unlordly]

Its common enough in retail that a new business matches or undercuts a price they see competitors using.
I can think of several suppliers that I have used that deal with standard discounts for all but their biggest customers. Are you a big customer to the supplier or merely one of hundreds? If big enough then negotiate.
The competitor may continue to match your price regardless.

Over the years have seen hundreds of retailers sell for what I would consider below cost. Big pockets, business is a game to them, lack of understanding of pricing needed, better cost control - no way of knowing unless someone blurts out the information (rare).

With what we considered to be a decent discount we sell at significantly less than RRP. We can do this because we have other revenue streams. The only way the competitor could match our prices is by receiving the same discount.
The big customer question is a bit of a distraction. If I go into Tesco and spend £100 a day every day across all sectors I'm a big customer. If I visit twice a week and buy 200 bottles of milk, my spend would likely be less but I'd be a valid contributor to the milk sales figures.

 

[MOIC]

Have you considered that your competitor is working on a smaller profit margin, just to compete with you?

It’s not uncommon for businesses to have a ‘loss leader’ to gain market share.

 

[Lucan Unlordly]

Have you considered that your competitor is working on a smaller profit margin, just to compete with you?

It’s not uncommon for businesses to have a ‘loss leader’ to gain market share.

They can't compete without a similar discount.

 

[japancool]

They can't compete without a similar discount.

No, that's nonsense. They might be getting a discount that is slightly worse than yours, but they could be making, and be prepared to accept, that they have lower margins and are making less profit.

Anyone can compete on price, it's how much profit - or loss - are they willing to make?

 

[MOIC]

They can't compete without a similar discount.

. . . . Loss leader!

 

[Newchodge]

Surely, if they are, realistically, the only supplier for what you need, they don't need to give you a discount. It's that simple, isn't it? At the moment when most people are finding trading difficult, they will charge you what they need to charge you. Are either the competitor or the buying price seriously affecting your business? If not, what's the problem?

 

[Mr D]

They can't compete without a similar discount.

They can compete. They are doing so.
Whether simply to get sales or even not making a profit is not your concern.

 

[Lucan Unlordly]

No, that's nonsense. They might be getting a discount that is slightly worse than yours, but they could be making, and be prepared to accept, that they have lower margins and are making less profit.

Anyone can compete on price, it's how much profit - or loss - are they willing to make?

A difference of opinion as to what compete means then.

There's an awful lot of 'could be, could have, might be' in some responses so let me nail this down. I know exactly who and what we are dealing with here. I know their overheads, I know their buying habits, I know the sort of volumes they are achieving, I know their track record. The object of my post was not to seek guidance about the circumstances enabling a competitor to 'compete' but to seek a general view as to how you would approach the supplier without appearing bolshy.

 

[Lucan Unlordly]

Surely, if they are, realistically, the only supplier for what you need, they don't need to give you a discount. It's that simple, isn't it? At the moment when most people are finding trading difficult, they will charge you what they need to charge you. Are either the competitor or the buying price seriously affecting your business? If not, what's the problem?

My 'Tesco' milk analogy was clearly lost in transit, but I'd never take it for granted that any supplier needs us more than we need them, and vice versa. That's the basis on which the business relationship in this instance has thrived. The issue is not about our discount, but that we believed we'd achieved a level where it was earnt.
No, not seriously affecting the business but a distraction.

 

[Shopclicks]

The object of my post was not to seek guidance about the circumstances enabling a competitor to 'compete' but to seek a general view as to how you would approach the supplier without appearing bolshy.

What would you do with an extra discount off trade if you got it?

What's the ratio of your sales vs the new competitor?

Is this a single SKU or several?

 

[Newchodge]

My 'Tesco' milk analogy was clearly lost in transit, but I'd never take it for granted that any supplier needs us more than we need them, and vice versa. That's the basis on which the business relationship in this instance has thrived. The issue is not about our discount, but that we believed we'd achieved a level where it was earnt.
No, not seriously affecting the business but a distraction.

Then think of something else.

 

[Lucan Unlordly]

Then think of something else.

What do you suggest?

 

[Newchodge]

What do you suggest?

How sad it is that the sycamore tree was cut down. Whether there will be a major storm in the next month. If the issue is only a distraction, distract yourself with something else.

 

[Lucan Unlordly]

What would you do with an extra discount off trade if you got it?

What's the ratio of your sales vs the new competitor?

Is this a single SKU or several?

Pass it on....

Too early to assess...

Several, all lines from the supplier in question...

 

[Lucan Unlordly]

How sad it is that the sycamore tree was cut down. Whether there will be a major storm in the next month. If the issue is only a distraction, distract yourself with something else.

...and how exactly will that take my mind off of customers trying to play us off against the other?

 

[Newchodge]

...and how exactly will that take my mind off of customers trying to play us off against the other?

You said it wasn't seriously affecting your business, so stop stressing about it.

 

[Lucan Unlordly]

You said it wasn't seriously affecting your business, so stop stressing about it.

Isn't that what Woolworths and Wilkos thought?

One minute kings of the high street, next overtaken by some little outfits called Home Bargains & B&M