Identifying your Niche
Before you begin the process of sourcing your stock, it is always a good idea to visit a competitors store to see what they are stocking and what price levels they are retailing at. Try to gain some idea of the brand names that are being sold and decide which seem to be the highest selling lines. It is always a good idea to have a look in their reduction sections to get an idea of which items are not selling quite as well and are being sold off cheaply.
It may be possible that the retailer will talk with you. This is more easily achieved if they are some distance from your location and therefore not a retailer you will be in direct competition with. If they will talk to you, attempt to get an idea from them of which items sell best and at which times of the year. What sort of pricing strategy do they have? Do they offer multiple price deals on new products to introduce them etc? What items don’t sell too well? Remember, just because items don’t sell too well for them, it doesn’t mean they won’t for you.
Once you have established your product range, or at least a broad knowledge of a product range, it is time to search for the products. It may be a good idea at this stage to visit some trade exhibitions or shows to broaden your own knowledge of the particular product range you have chosen. You may find that newer versions of products are about to be released onto the market. Having this knowledge can help in two ways. Firstly, it gives you an opportunity to source a new product range other retailers may not have discovered yet and secondly, you could use this information to your advantage and reduce your prices down for the stock that will be replaced with newer versions. This can be done more gradually and with greater effect if it is carried out in advance of the new products arrival.
Careful consideration of your supplier is important to any retail business. You need to be able to make sure you have a supplier that will not let you down. You simply will not be satisfied with a supplier who will raise prices with little or no reason just as soon as you have become reliant on them. Check out reviews for their service where you can.
Sourcing Your Goods
Suppliers come in many different types. Briefly, you can purchase from Manufacturers, Importers, Distributors, Wholesalers and even from Auctions. Each of these sources have plusses and minuses.
Manufacturers – It can sometimes be beneficial to approach manufacturers directly. Often they will sell directly to the retailer, but to do so the manufacturer will usually expect large bulk orders. In some rare instances exclusivity can also be obtained which will ensure an extra possibility of success in your business. If a manufacturer will not sell to you directly, then you should ask them for a list of their distributors.
Importers – Buying direct from importers can hold serious advantages, but also serious disadvantages. You can get the best prices, buying foreign goods directly from an importer, but you should take into account shipping timeframes, product life cycles, tax and duties and other associated problems.
Distributors – They sell large varieties of products at slightly higher prices than the manufacturers. It is possible to buy smaller quantities with little or no minimum quantities. Often items will be shipped for free.
Wholesalers – This type of supplier most often gives the best price for you to pass on to the customer. They usually have a large range of products and you will find a large amount of merchandise at the best possible prices. Wholesalers will often sell pallet loads of items and even truck loads. There are often terms and conditions attached to certain sales, as with any purchase.
Auctions – You can buy items from Auction sites such as Ebay or from Auction companies where stock is being sold off in bulk. Often you will find large bankrupt stocks available at low prices. This is not a consistent supply of stock items though and should be considered as a one off supply.
Identifying Potential Suppliers
When you have identified the products you want to stock, you need to identify the best possible vendor for your retail business. You need to be able to find a vendor that will supply products to you at the best possible price. These products need to be of the best quality and the vendor must be able to guarantee delivery times and be reliable when they commit to delivery. Problems normally do occur and the company must be able to back you up that eventuality with the best possible Customer Service.
Ask The Supplier Some Questions
What is their minimum order quantity? – If they insist on a large order quantity, you could end up with a better price overall, but if the products don’t sell well, this could result in large items of stock and future sales at a significant loss. Will the supplier negotiate over order quantities? It is always worth asking.
Who else sells their products? – Try to discover if there are other local retailers being supplied with goods by the same company. It won’t be progressive to be in direct competition with other local suppliers.
Question them about promotional items or off price products – The vendors will often mark down their products, just as the retailer will. It is always worth asking the supplier if they are willing to sell items to you in this way.
Are the items you are ordering re-orderable? – Sometimes vendors’ stock items that are simply bulked up in their warehouses and when the stock is exhausted they won’t be selling any more of this stock.
If items don’t sell, will the supplier exchange products for other more saleable ones? – Its worth asking the vendor if this is a possibility. Always make sure though that if they do agree that this is written down clearly in the Terms and Conditions.
What is the delivery timeframe? How long will goods take to arrive? Do you have to order in advance and book delivery dates significantly ahead?
What are the terms of payment? Do products have to be paid for upfront or is it possible to create an account with the vendor and be billed on a specific date each month.
You can find out about the supplier’s reputation through references or simply by questioning sales reps and other clients.
Pricing Your Products
Finding the correct price point is of paramount importance for your retail business. Pricing a product too high will deter your customers, pricing an item too low and you will lose profits or even money along with in certain instances the customer’s ‘perceived value’ of the goods.
Take a look at local retail outlets and see what sort of price point’s that similar goods are set at. Always attempt to fix your prices as close to these as possible. Think about employing promotions which allow items to be reduced by a certain percentage or where products can be given away for free with the purchase of other products. Your supplier may run promotions now and then which you could take advantage of, selling products on a similar cost level to your customers. This could attract both new and existing consumers.
Have you considered a customer loyalty card? Customers that spend a specified amount of money can receive a discount amount off their next purchase. Incentive shopping is often seen as a good way of ensuring return custom.
Primary importance should be given to your sales history. Learning from the products you have already bought for your retail business, which have been successful or unsuccessful is a very valuable aspect of buying stock. The next time you go to purchase more, go to the supplier with the knowledge gathered and you will be in a much stronger and more confident position.