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Source: Small Business
Management Wholesalers
offer services which retailers can use to strengthen their operations. In some instances,
the "helping hand" concerns only sales. In others, it extends to advice and help
on record keeping, financing, administrative practices, location, insurance, and
personnel.
This Chapter discusses such services, pointing out that the range of assistance varies
according to the individual wholesaler and the line of merchandise. Some of the services
are free, but others carry a fee.
If you haven't checked the management services that your wholesalers offer, you should.
Because their business depends on you and the other retailers to whom they sell, they are
common sources of assistance.
Depending on the types of assistance offered, your wholesaler may be able to help you
"butter your bread." Some wholesalers offer services on sales promotion, buying,
and new developments in products. Others try to "think retail" and also provide
services that help to increase profits as well as sales, They offer assistance with
financing and accounting.
The types of services and the extent to which they are available varies with
wholesalers and lines of merchandise. Your wholesaler-distributor may or may not provide
all of the services discussed in the Chapter but reading about them should help you when
you investigate such offerings.
Promotion
Wholesalers often help in promoting the products they sell to retailers. Some of these
services are free, others carry a price tag. However, as a rule, the price tag is not
great because the wholesaler spreads the cost of this sales-building program over a number
of retailers.
Featured items. One of the most effective forms of promotional assistance is
reselected merchandise that you can feature cooperatively with other independent
retailers. By pooling customer orders for such items, your wholesaler can often secure
price concessions or other favorable terms from manufacturers or processors, Generally,
the wholesaler passes these savings on to you, the customer, to help you counter the price
appeals offered by large retailers who buy directly from the manufacturer in large
quantities and thereby get price concessions. In other cases, a wholesaler-distributor
will sell these reselected items at a cost in an effort to have a major part of your
business.
Stock Control. In some lines of goods, the wholesaler provides help with stock
control. For example, a system is set up whereby the wholesaler's staff, with a minimum of
attention from you, can keep your stock at the level you need for supplying your
customers.
One drug wholesaler uses pressure-sensitive labels on products and a computer to help
retailers with stock control. When the retail druggist sells an item, he or she peels off
the label and pastes it on a card. The wholesaler runs them through a computer for
automatic maintenance of the retailer's inventory. This practice helps the retailer avoid
tying up money in merchandise that doesn't move.
Point-of-Sale Promotional Aids. Some wholesalers are major sources of display
material designed to stimulate "impulse buying" for both nationally advertised
and private brands. Because much of this material is furnished by manufacturers, the
wholesaler keeps retailers informed about what is available and tells retailers how the
aids can be used most effectively, In some instances, the wholesaler helps retailers in
building effective window, counter, and bin displays. Sometimes the wholesaler may send an
employee to work on the retail sales floor during special promotions.
In some lines of business, wholesalers offer another type of promotional aid -
showrooms. For example, they allow their dealers to bring retail customers to their
showrooms to inspect models which the dealers do not carry as regular stock.
Co-operative Advertising. Advertising on a co-operative basis with a
wholesaler-distributor can be a reasonable economical way for featuring your merchandise
and building customer loyalty. For this type of advertising, many manufacturers give the
wholesaler an advertising allowance on purchases. This practice reduces costs that are
charged on a percentage basis. Depending on the type and number of potential customers,
the media most often used by wholesalers are radio and television, newspapers, and
handbills.
Market Information
Wholesalers often supply market information that can help a small retailer attract
customers and satisfy their wants. In numerous contacts with local businesses and distant
suppliers, the wholesaler accumulates information about consumer demand, prices, supply
conditions, and new developments in the trade. The wholesaler relays the information to
retailers through bulletins, newsletters, order books, invoices, and sales people. One
small retailer summed up these marketing services by saying that, "The wholesaler is
in a good position to tell whether things are slowing down or changing and keeps us aware
of these changes."
Consumer Demand. The wholesale's position between national and regional
suppliers and local buyers enables him or her to "feel the pulse" of the
consumer demand. The wholesaler can recognize, for example, events at the national and
regional levels that are likely to bear on the amount of local consumer spending. Through
numerous contracts with local retailers, the wholesaler learns which items have attracted
the attention of consumers and which items have not. By reviewing orders, he or she can
sense when demand for a product is changing and advise customers to adjust their buying
and inventories accordingly.
Price. Often you get comprehensive and up-to-date information from your
wholesaler. Most wholesalers can collect competitive price information from their
customers much more economically than the individual retailer could collect it.
Suggested retail prices are also supplied by many wholesalers, particularly those
offering co-operative advertising plans or those who sell their own private brands.
Supply Conditions. You can usually depend on your wholesaler to keep you
informed about primary market conditions that would affect the supply of a particular
product. Information concerning the possible scarcity or super-abundance of consumer goods
or expected major shifts in prices are of particular importance when they reach you in
time to be reflected in your buying plans.
New Developments. One of the easiest ways to keep abreast of new methods, new
products and new ideas is through the bulletins, newsletters, and other publications
circulated by many wholesalers. These media often provide condensed versions of articles
appearing in the trade or business press, lists of new products being introduced by
manufacturers, pictures or description of new equipment, and suggestions for improving
merchandise displays and selling performance.
Financial Aid
Many wholesalers provide a type of financial aid that retailers take for granted, if
they think about it at all. By making prompt and frequent deliveries, wholesalers enable
their customers to keep inventory investment small in relation to sales. This indirect
financial aid reduces the amount of operating cash needed by the retailer.
Another type of indirect financial help is "open book" or trade credit. The
wholesaler-distributor bills you for merchandise purchased and allows a discount for
payment within a specified number of days.
In some trades, though, wholesalers extend direct financial assistance through the
practice of delayed billing. For example, some wholesalers of lawn and garden supplies
deliver seed to retailers in January but do not bill them for it until May. Nor is it
unusual for wholesalers handling toys and Christmas decorations to ship merchandise to
their retailers in June and July but delay billing until December.
Accounting Systems
A number of wholesalers help their retail customers to maintain adequate accounting
systems, Several types of accounting assistance are available through wholesalers who
offer this service. Some wholesalers have compiled forms and manuals that retailers can
use as the basis for goods records.
A few wholesalers have retail accounting departments that perform virtually the entire
accounting function for their customers. Retailers who use such a system supply operating
information to the wholesalers at periodic intervals.
Other wholesalers have negotiated "umbrella" contracts with private
accounting firms. These firms, in turn, do the accounting work for a given group of
retailers - often at a smaller fee than the accounting firm could offer an individual
retailer.
Policy and Methods
Many wholesalers offer guidance and counsel that retailers can use in setting policies
and in improving methods. Some of the areas covered are public relations housekeeping
methods, and administrative procedures, Such assistance is usually available for the
asking through the wholesaler's sales staff. In some instances meetings are held to
discuss such subjects, and retailers are kept abreast of new developments through
bulletins and newsletters.
Many wholesaler-distributors belong to a trade association that specializes in their
commodity line. These association often publish monthly magazines as well as brochures
aimed at helping the retailer.
Suggestions on setting policy and improving methods can be helpful because many small
retailers get involved in the day-to-day tasks of keeping the business moving along. When
this happens, they lose sight of the big picture, Often they overlook opportunities to
improve their operations. For example, they know the value of good public relations but do
nothing about it.
In other instances, they may not know how to build a favorable image and their time and
money are spent uselessly. Because he or she is not involved in the routine of a store,
the wholesaler can often detect such management weakness in customers and suggest ways for
correcting them.
Looking Ahead
Many wholesalers go beyond day-to-day operating assistance and offer services that are
designed to help their customers with long range problems. They offer help on real estate
problems, financing, insurance and personnel.
Real Estate. Some wholesalers pass on to their retailers tips on stores that are
for rent or for sale. These tips are given to their customers when they are considering a
branch store. These wholesalers usually maintain up-to-date real estate files by gathering
information from their salespeople, customers, newspapers, and real estate agencies.
Depending on your wholesalers, you may be able to get help in analyzing the suitability
of various location, including an evaluation of the market potential. Some wholesalers
keep a finger on the direction and character of urban development and offer advice about
desirable future locations. They help the retailer establish a priority rating for each
location, New locations, particularly in shopping centers and other large-scale trading
area developments, may involve complicated leasing arrangements.
Finance. In some cases, wholesalers-distributors help their retailers with long
range financing. For example, a wholesaler may lend funds to enable a retailer to
modernize an old building, acquire a new site, or erect a new building, The need for this
type of financial assistance is especially evident in the retail food business. Here the
trend toward costly supermarkets coupled with the inability of banks to help any but the
best credit risks has greatly increased the importance of wholesalers as sources of direct
financial aid.
Indirectly, a wholesaler can help you with financial needs by supporting you at the
bank or insurance company. The loan is made on the wholesaler's recommendation, and the
wholesaler generally guarantees all or part of its repayment.
In long-range financing, the retailer who deals with a relatively few wholesalers is in
a better position that the retailer who buys small amounts from many wholesalers. The
wholesaler naturally looks for retailers who have proved themselves and whose business
offers growth possibilities for the wholesaler too.
Insurance Counsel. A number of wholesalers try to help their customers secure
adequate protection against risks from theft, fire, smoke, and water damage. This
assistance may involve: (1) keeping you alerted to your insurance needs, (2) making sure
that your insurance is kept in force, and (3) helping to get your claim settled as quickly
as possible if a loss does occur.
Personnel. Your wholesaler-distributor through his or her sales staff can help
you obtain qualified store personnel in informal ways. For example, the wholesaler might
tell you of an outstanding salesperson who wants to change jobs. Some of the larger
wholesalers have even set up auxiliary personnel departments. Such departments maintain
files on persons seeking retail employment and refer prospective employees to retailers on
request.
Which Services Can You Use?
Not all of the services available from your wholesaler are equally important to you.
Some may be indispensable. Others you can handle more effectively yourself. Some services
carry charges, and you must decide whether or not they are worth their cost.
The first step in determining which services you can use is finding out what your
wholesaler offers. Get all the details you can about each service that is available to
you. Find out what advantages a service has for you. Find out what obligations it carries.
First Things First. At this point, a few words of caution are in order. As far as
you're concerned, the main duty of a wholesaler is to supply you with items that you sell
at a profit. Success in retailing starts with shelves and displays full of goods that
customers want. When accepting management assistance from a wholesaler, you must be sure
first that the distributor is a reliable source of merchandise.
A small retailer, however, should know his or her customers better than the wholesaler.
In mutual assistance, such as special promotion, the retailer should prevail. Resist the
temptation to overbuy on attractive offers. For example, is there enough profit in using a
missionary salesperson to train your sales staff and sell to customers when you have to
buy in gross lots rather than the usual case lot? It is your loss when the item doesn't
move as fast as was thought. Try to schedule special promotions that are offered by the
wholesaler to suit your plans for promoting sales and profits. Use cooperative advertising
when it is to your advantage, but don't be a slave to it.
In fact, don't be a slave to outside assistance whether it is from a wholesaler or
another source. Regardless of a wholesaler's services, compare them with what you already
have. If he or she can provide, for example, an accounting service, how does it compare
with yours? Is it easier to use? Harder to use? Cheaper than yours?
Follow Through. When you sign for services from your wholesaler, follow through with
your end of the agreement. Provide the information and direction needed to render the
services you need. For example, when you use a wholesaler's accounting service you need to
send daily expense and revenue data on a given schedule and format so the accounting staff
can include your data its work load.
Matters that can cause misunderstandings should be pinned down. for example, the order
form should spell out prices, terms, dates of shipment, and liability for shipping costs.
When an agreement is written, often mistakes can be corrected without damaging your
relationship with the wholesaler. But a verbal agreement may be another story.
If you want help in selecting and training personnel, you will need to give the
wholesaler job descriptions to identify the types of employees you want and to determine
whether applicants have the necessary skills.
Talk with your wholesaler and other business associates before obligating yourself.
Make sure you need a service and figure out exactly how - and how much - you will profit
from your wholesaler's services.
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