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| Subject: Promising Too Much Can Mean Too Little Too Late | |
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Author: Dennis S. Vogel |
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Date Posted: 15:20:03 05/08/06 Mon In reply to: Dennis S. Vogel 's message, "Build Multiple Streams Of Success Realistically & With Persuasion Part 6" on 16:23:23 04/24/06 Mon Economies of scale are great, but achieving them may be rough. Ramping up doesn’t always happen quickly or smoothly. Even vending used products can have “production” problems. It’s especially true if a particular version or copy of a product is in demand. 1 Example- If nostalgia increases because a singer dies, people may suddenly want tapes, CD’s & records featuring the star. Store owners may demand these, but unless these are still being—legitimately—produced, you might not get enough supply for the demand. Retailers, you serve, may feel they’re missing an opportunity. Charging Ahead Too Quickly Can Lead To Charging Back Even if store owners want (retail demand) more of particular product & are angry about not having enough, the little inventory you provide maybe too much (because of less-than-expected consumer demand). Then they’d want you to remove unsold products, possibly at your cost. If they paid for the products, they may expect you to refund some or all of the money. Having a charge back clause can seem like a necessary evil, but it may be a concession you’d have to grant. Examples of charge backs are— 1: “refunding/making good on” full retail price: Stores pay wholesale prices, but expect suppliers to guarantee a sales level, maybe $1,000. If consumers buy $500 worth of the products, a supplier would pay a retailer $500. This would be to cover the lost opportunity/sales volume the store could’ve had by stocking another product. 2: paying the difference between wholesale prices & retail prices. A supplier would haul unsold products away. If a store didn’t prepay (the wholesale price) for the inventory, a supplier would pay the store the missed retail markup. 3: paying the difference between the sale price & retail price. If the suggested or guaranteed price is $10, but low demand leads to a discounted price of $8, a supplier pays a retailer $2 for each product sold for $8. (If another retailer can generate more demand, it may be better to remove the products & put them in another store.) 4: No charge back options or an alternative, whatever the parties agree on. Be sure the terms are understood & understandable, so a business owners’ successors can continue. Since we’re mortal, we can be sick, disabled or worse. Somebody may buy, inherit or temporarily run our businesses. If we can’t talk or write, others won’t know what we agreed our businesses would do. Side bar- Legal Agreements Can Be Written Instructions It’s best to have records & written plans for those who take over. When we have agreements, these can communicate to others when we can’t. Some don’t like written agreements, but they’re important for more than trust. Paying Rent to the Monopoly Retailer Like the board game, you won’t go around many times to get paid, without paying rent. Retailers have a monopoly on display space in their stores. Powerful retailers charge slotting fees—with or without charge-backs. Slotting fees are like rental payments paid for display space. Even if a supplier doesn’t keep up with demand & displays are empty, slotting fees may still be charged, unless the agreement is different. Some retailers will fill the unfilled spaces with other suppliers’ (popular) products & still expect the contracted supplier to pay the fees. Retailers may be slow in removing that other supplier’s products, if the demand, for those, is higher. Unless you check on this, it could keep happening. Retailers want their display spaces filled & may feel fudging is OK. Some retail employees stuff a few excess products in other slots. If you have 4 slots, but your unsold merchandise can be consolidated into 3 slots, your 4th slot may be stuffed with other merchandise. This could mean your products wouldn’t be as noticeable. Since shoppers hurry & are distracted, 1 less facing could be a problem. It’s a problem, especially if your reserved slots are above or below average shoppers’ eye levels. There’s also the issue of returned merchandise because of damage or defects. Testing used products before stocking them can be expensive-–in time & money. But if you don’t test products, retailers & their customers could be very angry, when they get less than they pay for. Many vendors & suppliers seem to think they’re in a food chain, not a supply chain. Vulnerable channel members may feel they’re being eaten or, at least, taken advantage of. Dennis S. Vogel thrivingbusiness@email.com There are many components of solid, lasting success. If you want yours to last, you need effective marketing. You can find a lot of what you need here. http://web1.lakefield.net/~thrivingbusiness/ http://www.voy.com/31049/ [ Next Thread | Previous Thread | Next Message | Previous Message ] |
| Subject | Author | Date |
| Good Intentions Mean Too Little | Dennis S. Vogel | 14:53:09 06/23/06 Fri |
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