What discounts can I get from a supplier?

“All suppliers have a discount system,” says Alexey Baranov, and there is no reason not to believe him. For over 3,5 years, Alexey served as Nike's Executive Commercial Director in Siberia and the Far East Region. In this article, he gives valuable advice on building an effective policy for the long-term cooperation of your company with suppliers. So, what discounts can I get from a supplier?

Discount #1: Volume Discount. At first glance, this seems simple: the larger the volume of products you purchase from a supplier, the higher the discount you receive. This discount scheme is popular with many market players, as it's beneficial for both parties. Importantly, the discount is calculated based on annual revenue: virtually every large wholesale company can offer customers a scale based on product volume (which implies a year-long pre-order) and the corresponding discounts. In this regard, there are two types of discounts that need to be distinguished.

Discount from available warehouse stock. A key point: this discount is traditionally two or even three times smaller than the pre-order discount. Here's why. Imagine you're a supplier company and you're seeing a sharp increase in demand for a certain product. Naturally, when you pre-order this product, you also include your own order to ensure that this popular item is always available in your available warehouse. You pay the factories, ship the goods to Russia at your own expense, and incur costs for storing the products in the warehouse for a period of time. Consequently, the company incurs certain costs for maintaining available warehouse stock—and all operating expenses are factored into the discount, so it's much smaller than the next discount.

Pre-order discount. In other words, it's a discount for special conditions. It can be quite substantial for two reasons. First, the supplier doesn't incur any additional storage costs for your ordered goods—you pick them up immediately at their distribution points. Second, when negotiating strategic terms with each specific supplier, you have the right to negotiate various terms of cooperation. By reaching a commercial consensus, you gain the opportunity to receive and combine discounts for adhering to various terms of the agreement. What these terms may include will be discussed below.

Discount #2: For supporting a brand corner in a store. A brand corner is a separate area of ​​a store dedicated to a single brand, complete with its logo, advertising posters, images, graphics, and slogans. Let's consider a situation where you own a multi-brand store and want to dedicate a portion of your retail space to a specific brand. In this case, the supplier will not only decorate this corner with its own brand logo but also offer an additional discount for presenting the brand to potential customers through high-quality merchandising, helping to develop the brand.

Discount # 3: For using seasonal branded initiative graphics. Each company has its own mission - this is the necessary channel through which information is transmitted to the buyer that he is not just acquiring a thing, he is acquiring a new quality of life. Accordingly, any brand is extremely interested in having its story told in as many stores as possible. In order to demonstrate not just a product, but brand values ​​and ideology, you must order a certain amount of products. As a rule, part of the ordered goods will settle in your warehouse, but for this, the supplier company gives you, in addition to discounts, advertising support: hangs up graphics with enticing posters, puts up a demonstration stand with products, - in general, actively attracts buyers, and they Do not take long.

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Discount #4: For No Cancellations. This situation often occurs: you order a product from a supplier, expecting very good sales, but then another crisis hits, and you're forced to reduce your order by 15 to 30 percent. This trend is widespread across the country. In such harsh conditions, the supplier loses money, because the product they've already invested in is no longer in demand and will be sold at a discount of approximately 30 percent—they can't cover these costs. Therefore, it's more profitable for the supplier to offer you a discount for no cancellations: the discount will amount to 1-2 percent of your total annual sales, and the company reduces the risk of losing large sums on cancellations. Use this when negotiating partnerships with suppliers—an additional discount will never hurt.

Discount #5: For timely payments. Typically, if you have a certain payment history with a supplier, they will issue you a trade credit if needed. Let's say a supplier gives you a 60-day grace period, but for various reasons (you ordered the wrong item, or the product arrived late due to logistical issues), you pay on the 90th day instead of the 60th, putting the supplier in an extremely difficult financial position. The fact is that the vast majority of businesses borrow from banks, so the money you borrowed for the loan was borrowed at interest. Your failure to pay has resulted in the supplier's bank debt. To encourage you to make all payments on time, the company is willing to offer you a discount.

Discount #6: For brand promotions. The mutually beneficial partnership is clear: the store openly advertises the brand's products, attracting loyal potential customers, thereby promoting the brand. Suppliers will certainly encourage this in every possible way, and discounts are readily available.

Discount #7: For branded clothing for staff. Let's say you have six salespeople in your store who need to wear a special merchandise each season. You prepare an analysis of how much this will all cost, and the supplier gives you a discount on this.

Discount #8: For defective items. It's no secret that defects are everywhere. And if the defects aren't serial (in which case they constitute 0,7-0,8 percent of the batch), most Russian distributors offer a discount, typically up to one percent. In other words, you agree to accept defective items if they occur—which isn't mandatory—and the supplier adds one percent of each batch to your cart. Sometimes, the company encounters brands with serial defects. In this case, the company can appeal to the Consumer Rights Protection Commission as a retailer, which will take the customer and supplier to a new level of dispute resolution. Nike has a very interesting approach in such cases: they ask you to burn the defective item and send them a photo, after which the company will reimburse the payment.