Partner With Your Vendors

A few years ago, vendor “partnerships” were all the buzz. Then confusion about the lingo developed, and corporate attorneys grew concerned about the inference of equity from the word. As a result, usage died down. But the spirit of the term should be alive and well in your company.

The days of keeping all your information close to the vest and trying to extract every cent out of a vendor contract without regard to a long-term relationship should be long gone. Instead, foster a spirit of cooperation and mutual success, because if both parties aren’t making money, the relationship soon will be over.

In my experience, nurturing partnerships with your vendors — from printers to list managers to insurance carriers — will pay big dividends. Nurturing doesn’t mean you’re giving away the keys to the corporate treasure chest. It just means you’re sharing opportunity, risks, ideas and most importantly, information. It’s all of these things together that produce not only a mutually beneficial economic relationship, but a human relationship as well.

Following is an example of how sharing information and risk created a brand new opportunity for my company and one of our key vendors. Perhaps it will spawn ideas you can apply to your own situation.

Move Together

It started during a trade show I attended in Las Vegas. I was having dinner with some reps from one of our largest vendors, and we discussed the vendor’s current overall performance. The reps admitted their business with department stores was down, and they wanted to talk about ways to increase business with my company.

I wasn’t sure how to increase the vendor’s share of our current offering, so I suggested we think of something new to layer on top of our current efforts. I also asked if the vendor might share some of the risk if we did so.

It so happened I’d been considering sending a direct mail package to the buyers in our largest category. This package would include a mini-catalog, along with a letter and order form offering items that weren’t found in the regular catalog. I wanted to encourage existing customers to spend more within a category from which they’d already purchased (ours is a merchandise catalog with eight major categories, and most people purchase in only one). I also hoped the extra contact in a different format would spur more sales and not cannibalize the catalog results.

Then it came to me: Ask the vendor to participate in this venture by providing (exclusively) most of the product. At the same time, the vendor would share in the risk of the venture and the potential upswing. I asked the reps if their company would protect us on the inventory and provide sharp pricing. In exchange, we’d work out a plan to share some of the revenue after the effort reached a certain threshold.

A few weeks later we started work on the campaign. At press time we still didn’t have results, but I’ll certainly be excited to see them. If the test works, this will be a substantial amount of new business for both of our companies.

This never would have come up if the vendors’ reps hadn’t been comfortable sharing their current business challenges and asking for more business. Due to the long-term and satisfying relationship with this vendor, our company wanted to do something to help it. In the end, we came up with an idea that should provide great benefit to both of us.

Dance Steps

Here are some other ways to better partner with your vendors:

• Communicate your challenges. Let your vendors know what your current issues are, and ask them about theirs. Maybe it’s cash flow, warehouse space, margins or price points. If your vendors are aware of these, they can think of ways to help, and you can get creative with options to help them. Maybe you’d be willing to give a point or two on the margin of an item in exchange for longer payment terms.

• Get your vendors excited about your business prospects. Once they’re excited, they’ll be more inclined to help you get there. Getting 25 cents off the price of an item is much easier when you explain that you’ll be able to offer it at a much better price point and sell 10 percent to 15 percent more units.

• Negotiate rebate programs. If you’re just a little short of your target margin on an item or category, and the supplier can’t shave any more off the price, a great way to get a better cost of goods is to negotiate for a rebate when hitting a certain volume level on the product or overall spending increase with that supplier. Suppliers often love this because they know it motivates you to hit those levels and spend more money with them. It’s a win/win for both parties. (Don’t forget to manage it well, and remember to collect your rebate.)

• Explain your costs to your vendors, especially if they aren’t familiar with the catalog business. It’ll help them understand the risks you’re taking by offering their products. Make sure they understand how many people will see their items; how all your costs are front-loaded; how few people actually will order from the mailing; the high opportunity cost of not being in stock; and your fulfillment costs. This data will help vendors understand how you’re different from a retail operation and why you generally need more than a keystone to be successful with most items.

• Pay your bills on time, and play fair. I can’t stress this enough. If you pay your bills on time, communicate when and why you can’t, and treat your vendors fairly, you’ll greatly increase your credibility. I always want to be at the top of the list of good accounts to work with, so when there’s a shortage of product, a special close-out offer, a sharper price or a better delivery date I want, I know my requests will be considered.

In any business your vendor base is one of your biggest assets. Protect, nurture and reward it appropriately, and you’ll not only leave with the one who brung you, but you’ll have a great time while you’re dancing!

Phil Minix is the vice president of catalog marketing for Reiman Publications. You can reach him by e-mail at pminix@reimanpub.com.