Choosing a new supplier or manufacturer is much more complicated than simply falling in love with a jewelry line or wanting to build more store traffic with a recognized name brand. But all too often, retailers fall into one of these two traps, and they pay dearly for it for years to come. Instead, selecting a new supplier should come with a plan to develop your business. That plan should be specific, and tied to a sales goal for your company as a whole.
Most retailers don’t realize that 70% – 80% of their sales come from only 10 – 12 different suppliers, and over 50% comes from the top five suppliers. All you need is the right suppliers who truly produce for you.
You can only improve the sales in your store by developing or changing your top 10 suppliers. So if you want to increase sales by 50%, you need to increase the sales of your top 10 suppliers by a similar percentage. If you can’t do this, you won’t meet your goal.
To open a new supplier, you should have the money in the bank to pay cash and you should request a discount on the purchase. You should never incur debt in order to open a new supplier. You need to have a plan of how you expect that supplier to perform, and you need to have the money to invest in that inventory. Of course, most retailers will never do this, which is why they accumulate so much dead inventory, and tie up their precious capital in pieces that will likely never sell.
For a store doing $2,000,000 in sales and wanting to lift sales to $3,000,000, the average sale of a new supplier should be over $5,000 cost at key $2,500. Any new supplier you take on should have the potential to become 2% of your total sales, which would put them near the bottom of your top 10 suppliers. 2% of sales in a $2,000,000 store would be $40,000. Your opening order should be no more than $13,000 at cost. With an average cost of $2,500, the number of pieces purchased should be no more than five. These five pieces must be bought with great care.
As individual jewelry pieces sell, you should reorder them immediately. That means daily. Every day that a fast selling item is not in your cases means you are losing potential sales. Reordering should be a daily occurrence. And when you reorder, pay your supplier immediately. You will stand out from the crowd and win great favor with your supplier. They will work with you much more favorably when they don’t have to hound you for money. Statistics show that when jewelry pieces do not sell within six months, there is a very good chance they will never sell.
Opening new suppliers is the most important decision you will make in trying to take your store to the next level. Planning your cash flow, and planning what type of merchandise you need is absolutely critical to your business.