I have been talking with newsagents recently who made changes to their card supply arrangements which have resulted in them being worse off.
One newsagent switched from one the major card companies to a smaller company on the claim that sales would increase and the offer of a margin boost. Their sales, year on year, are down 25% following the move. The extra 5% margin they negotiated is worth nothing. They are worse off. It is easy for a card company to offer a bag of cash or a boost in margin. The harder road is to help you boos sales. However, boosting sales is better for you.
Another newsagent went from 100% with one company to 75%. The net increase in sales year on year was 2%. However, the sales drop for their main supplier, due to 25% less pockets, resulted in the newsagents dropping to a lower rebate grouping. Financially, they are considerably worse off. A lack of research leading up to making the decision has resulted in them losing money.
Some card company sales representatives are less than accurate when outlining hat a switch to their business would mean for the newsagent.
My advice to newsagents is caveat emptor, let the buyer beware.
- Take your time, talk to newsagents who have moved. Ask for details of the financial impact.
- Get every claim and every offering writing and signed by senior management of the company with authority to sign.
- If you are moving because of unhappiness with your current arrangements, take time to ensure that your existing supplier is afforded every opportunity to fix any problems.
- Get a written guarantee on the financial benefit of the move.
The two newsagents I have worked with don’t have anything to go off and cannot therefore easily get out of their worse-off situation.
Another thing to watch for is that your existing supplier has not given you any “free” stock in the past. Cost me $6000.00 paying back the “free” stock when i changed card companies.
As with ALL supplier contracts, they are one way traffic in favour of themselves. There is always a catch that IF they feel like using it they can and will.
The best bet it to never sign contracts as suppliers that are confident in there product will not need a lock in period as they have faith that there products will do what they say it will. We are slowly ending all our contracts as they fall due and not resigning and as of yet only a small number of suppliers are blowing up and refusing supply without contracts and we can do without these anyway.
Also all contracts must be able to be voided IF your lease expires or the business closes as I know people that were forced to continue to pay supply agreements even after they sold as it was IN the contract even after they return the goods.
Luke
“I know people that were forced to continue to pay supply agreements even after they sold as it was IN the contract even after they return the goods.”
What type of goods or services were involved in this type agreement. It would be good for us to be aware and beware of the who’s and whats’ with contracts such as you describe.
all contracts have a catch, so don’t be fool that you think you are smarter than them.
ATM’s, photo kiosks, internet kiosks, Card fittings (they needed to pay new price for fittings that were nearly 5 yrs old because that’s what the contract stated) also minimum contract payment for phone systems etc.
Luke, I’ve found the same with Photo Kiosks and the like so have never put them in my shop. As for card fittings, our supplier uses a different model now so this is no longer a problem. The people we purchased this business from tried to stitch us up with fittings etc…unsuccessfully in the end but it still cost us legal fees but tha was the unscruplouse owner of the business not the card company who infact helped us out.
I am giving you examples of suppliers I know of Brendan, if your card supplier helped you out then great but will it be the same if you try and get out of the agreement? Of course they play nice to start with but just like the bill express mess anything that locks you in for a period with no get out clause is worthy of a close look. Again if a supplier has faith in his/her product it should not have to rely on a lock in period.
Luke the only thing locking me into my card supplier is the payout of incentive discounts based on turnover, absolutely no other nasty shocks exist. The same for newsXpress of which I am a member, 30 days notice to resign is all that is required, not that I have any intention of severing ties with either organisation.
They are both top shelf and live up to their promised service levels. As I said I have been offered photo kiosks, internet kiosks etc as have most newsagents but declined for just the reasons you outline. The better suppliers are not so short sighted as to lock customers into bad deals andthat is their strenght and one of thereasons I am happy to have mutually beneficial contracts with them.
That is really the crux of the matter, any contracts must be mutually beneficial and that includes get out clauses for both parties.
Our card supplier gives us a good deal on pricing and billing – mainly due to our buying groups efforts. We take a strong customer perspective on this as well. We wouldn’t consider changing until we see signals from our customers that they are not satisfied. Sales are growing so we stay with them.
One thing is hugely frustrating though. We are committed and engaged operators. We want to be involved in the decisions of ordering, stocking layout pocket allocation, pos, etc etc. The card company is just diabolical in the extent to which they go to to avoid our input.
Cartons and cartons of cards just keep showing up on the door step. We now have more cards in storage than we have on the shelf (at least in floorspace terms). Their invoicing is tedious and time consuming to reconcile.
We have requested a review of the planning for our store but they just fob us off. They don’t seem to know what a planogram is.
It seems they just want us for our real estate and our capital and they think we should just keep our noses out of the rest of it.
We will get to a point of grief over this.
Sound like what I posted in my first comment Brendan, good suppliers do not need lock ins,
As I have stated Luke, I am not locked into ANY supplier. My suppliers are good suppliers, in fact excellent from my point of view.
Kevin -there are better card companies out there than the one you describe! Perhaps you have a rogue rep who is using your innattention to get great figures for monthly sales. I would be right on this via the State manager if I were in your situation. And you need to approve every order yourself for a while,to stop over-ordering. Good luck – the dollars in the storeroom are NOT working for you.
If you are part of a marketing group Brendan then are you not locked in to a certain percentage of your cards having to be from one supplier?
If you are happy then that’s great, good luck to you.
Luke, if a business is a small customer to several suppliers of the same product they will not receive the support that is possible when it commits to a major supplier. I think that is part of what Marks orinigal blog refers to. It is pointless having multiple suppliers of a product at their base price when better deals are available, believe me it makes a big difference to the bottom line. Please check the first paragraph of my post #8. I am not locke into a supplier or group but work with both because it is mutally beneficial for all parties and that is the crux of the matter. I know that ditching such relationships will only harm my business. I do not see how your bottom line can improve or be as strong as possible the way you appear to operate.
A gift rep said to me years ago that it is better to be an important customer to a few suppliers that an insignificant one to many and she was right. It is better not to be in the second group.
Me thinks, enough said by me on this subject.
My bottom line improves Brendan because I pick the best stock that suits my customers needs regardless of suppliers. Since we no longer are tied down to just one card supplier we can be more flexible and are selling more cards at higher prices. I have not presumed to pass judgement on your business model so please don’t be so ignorant as to judge mine, I have been doing this for too long and seen too many others come and go listening to reps advice to know they look after themselves first and last and will tell you what you want to hear.
Over the decades we have been associated with most of the marketing groups and had most suppliers in store, some we have kept some we have moved on from but we are still here and will outlast most others.