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RMG 200 (77)
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ch 11 part 2.docx

4 Pages

Retail Management
Course Code
RMG 200
Brent Barr

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NEGOTIATING WITH VENDORS Guidelines for Planning Negotiations with Vendors 1. Consider history – buyers need a sense of what has occurred between the retailer and vendor in the past 2. Assess where things are today – eg. Tommy Hilfiger shirts have been profitable for Sears in the past, three patterns sold poorly last season 3. Set goals a. Additional markup opportunities – eg. private label merchandise b. Terms of purchase – long terms of payment improve the firm’s cash flow position, lower its liabilities (accounts payable), and can cut its interest expense if its bowing money from financial institutions to pay for its inventory c. Transportation – the question of who pays for shipping merchandise form vendor to retailer can be a significant negotiating point d. Delivery and exclusivity – being the only retailer in a market to carry certain products helps a retailer hold a fashion lead and achieve a differential advantage e. Communications advertising allowances – vendors and their representatives are excellent sources of market information f. Advertising allowances – retailers can sometimes share the cost of advertising through a cooperative arrangement with vendors known as coop advertising (a program undertaken by a vendor in which vendor agrees to pay all or part of a pricing promotion) Know the Vendor’s Goals and Constraints 1. A continuous relationship 2. Testing new items – vendors need their retailers to provide sales feedback for new items 3. Communication – share sales information 4. Showcase Plan to Have at Least as - Even if the vendor is more powerful, aggressive, or important in the Many Negotiators as the marketplace, the retailer will have a psychological advantage at the negotiating Vendor table if the vendor is outnumbered - Negotiating teams should be of equal number Choose a Good Place to - People feel more comfortable and confidents in familiar surroundings- Negotiate Be Aware of Deadlines - Deadlines are important - Eg consider labour strike settlements ESTABLISHING AND MAINTAINING STRATEGIC RELATIONSHIPS WITH VENDORS Defining - Strategic relationship: (partnering relationship) long term relationship in which partners Strategic make significant investments to improve both parties’ profitability Relationship Maintaining Mutual trust - Trust: a belief that a partner is honest (reliable, stands by word, Strategic sincere, fulfills obligations) and is benevolent (concerned about the Relationships other party’s welfare) - Strategic relationships and trust are often developed initially between the leaders of organizations Open communication - Understand what’s driving each other’s business, their roles in the relationship, each firm’s strategies, and any problems that arise over the course of the relationship Common goals - Give both member of relationship incentive to pool their strengths and abilities and to exploit potential opportunities between them - Help sustain relationship when expected benefit flows aren’t realized Credible - Tangible investments in the relationships commitments - Involve spending money to improve the supplier’s products or services provided to the customer Building Awareness - No transactions have taken place Partnering - This phase might begin with the buyer seeing some interesting Relationships merchandise at a retail market or in an ad in a trade magazine - Reputation or image of the vendor can play an important role in determining if the buyer moves to the next stage Exploration - The buyer and vendor begin to explore the potential benefits and costs - The buyer may make a small purchase and try to test the demand for the merchandise in several store - The buyer will get information about how easy it is to work with the vendor Expansion - Buyer has collected enough information about the vendor to consider developing a longer term relationship - Buyer and the vendor determine that there is a potential for a win- win relationship - They begin to work on joint promotional programs, and the amount of merchandise sold increases Commitment - Both parties continue to find the relationship mutually beneficial, and it moves to the commitment stage and becomes a strategic relationship - Buyer and vendor make sign
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