Product Sourcing

This is number fourteen in our series based on Challenges of the
Future: The Rebirth of Small Independent Retail in America
, a 64 page white paper by Jack Stanyon, underwritten by the George H. Baum
Community Charitable Trust, the Illinois Retail Merchants Association, and the
National Retail Federation Foundation.  Today we take a look at Stanyon’s second Challenge (opportunity).

Challenge #2

Difficulties in product sourcing and merchandise acquisition.

If you’re a Tacony Corporation customer, this shouldn’t be a problem for you.  Stanyon cites (1) shrinking vendor structure (2) vendor minimum orders for single shipments and minimum annual purchases and (3) quantity pricing as issues which make it difficult for the independent to compete.

He says that "Manufacturer and distributor consolidation and the channel crossing of products are causing many problems for small independent retail."  Standardized products and the pressure for manufacturers to sell through multiple channels are two problems that Stanyon mentions.

He goes on to say that independent retailers can take advantage of sourcing new manufacturers and suppliers who are looking to establish themselves with innovative new products.  We couldn’t agree more. 

This may be shameless self-promotion, but Tacony Corporation began as an independent retailer sixty years ago.  Through the years we’ve grown our business by providing protected brands that the independent retailer can sell without fear of their customers seeing the same thing at the big box store down the street.   To be fair, we’re not the only manufacturer to do this, but many others have chosen a different approach to the market.

As a family-owned company, we don’t have the pressure from stockholders to constantly increase the value of their holdings.  We put pressure on ourselves to continually come up with new, innovative products and better, more efficient ways to serve our customers.  Our goal is to be the best, not the biggest.

Stanyon says that "another important aspect of the product sourcing challenge is often the need to establish an anchor brand to provide added credibility for other desired suppliers."  Unfortunately, many of those "anchor brands" are sold through multiple channels and offer profit margins that aren’t acceptable.  They become victims of their own success.  Their credibility comes from national advertising and wide distribution, which drives the price down making the product unprofitable for the smaller store.

One of the means for a dealer to increase profit margins is membership in a buying group.  Buying groups provide purchasing power and other benefits.  Their downside is that the dealer loses a certain amount of control by being a member.  A diversified supplier who specializes in the independent retailer market, not selling protected brands to mass merchants, provides many of the benefits of belonging to a buying group without the limitations.

In summary, it’s important that the successful retailer be a good shopper.  Work with your vendors, whoever they are, to increase your business.  Keep your inventory fresh by bringing in new products whenever possible.  Work with your manufacturers’ sales force to come up with new promotions, new in-store displays, and anything else that will increase your business.  Ask them what’s working for other dealers in other towns.

Network with other retailers at trade shows and conventions and don’t overlook those in other, non-competing industries.  The lawn and garden store, or the bicycle shop, or the bakery has many of the same problems that you do and you might just be able to brainstorm and give/get some good ideas. 

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