Small business retailers are quick to complain about a lack of visits by a sales rep from a supplier, often citing this as a reason to not order.
The only reason to not order products is if it is not working. Blaming a method of ordering is nuts in my opinion. It’s petty and ignorant of facts.
But back to sales reps. They are expensive and that expense is covered by product prices.
Considering reasonable wages, possible commission and operating costs, a sales rep costs a supplier at least $110,o00 a year – rarely less and often considerably more, especially in harder to get to locations.
A rep costing $110,000 a year would need to make the supplier at least $1 million in revenue, depending on the product category as margins vary.
Given that in an average year a rep can be on the road visiting stores for 200 days a year and often only around 175 allowing for in-office meetings, training, trade shows and more, the rep will need to write at least $5,000 a day in business.
Allowing for the geography of Australia, in regional Australia a sales rep might see 2, maybe 3, retailers a day. Often, though, it would be 1. In the city, the number could be 4 or 5.
Talking with some suppliers and allowing for data they shared, the $5,000 number for an average calculation like I am presenting here needs to be closer to $7,000 as that allows for closer to the 175 days a year in-store.
Covid has change all of this from a supplier perspective. Many have realised that they can maintain sales revenue without the pre-Covid in-store visits. They have looked at this as a bottom line benefit if they reduce their rep investment and replace it with a back office investment, but not to the sale value as the reps.
Many small business retailers love reps because they do work for them, by doing the orders. This is false economy. As I noted above, order what’s selling and do this yourself – be in control. Letting someone else spend your money may not be ideal.
Smart suppliers that reduce their investment in sales reps will pass on some of the savings to retailers. That’s what I am looking for. I don’t expect all the benefit as they do need to invest in back office people as well as appropriate IT infrastructure to make doing business with them easier.
I think the rep model as it relates to small business retailers is up for grabs, that significant change can be brought and that small business retailers and their customers can benefit significantly from this.