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Jim Green's blog

For New Buyers #3

January 9, 2012

A dilemma for most merchants is in determining the optimum number of vendors from whom to buy. Two alternatives of varying degrees exist. The first is to be highly selective with the vendor structure and only buy from a few. The second is to have a more well rounded, varied assortment by buying from many vendors. Of course there are degrees of each but the issue is the level to which the vendor structure should be minimized.

Many or Few Vendors

I have always believed that the fewer the better. For larger retailers this view provides far greater control and flow of goods as well as providing the leverage to gain an advantage during negotiations with the resources. Retailers, large or small, that become more important to individual furniture wholesalers can (and should) expect more from them. Better service, more advantageous pricing, quicker shipping, greater leniency in vendor policies, more visibility from the representative, all should be perks and benefits for putting more eggs in that vendor's basket.

The answer to vendor structure lies with several variables. How large is the dealer's company? How dominant is the dealer in the marketplace? At how many price levels does the dealer compete? Does the dealer tend to specialize by style category? Are there shipping issues to be considered?

First, it is important to recognize that there is not a wholesale furniture maker or marketer that can be all things to all people. They all possess specific strengths and weaknesses within their product lines. Some may argue that to have the best selection of furniture, a merchant should buy only the best and strongest products from as many vendors as is needed to have the best and most complete assortment; the proverbial ‘cherry-picking' method. I would argue against this thinking in most instances. Buying from yet another resource because that company offers a particular item for $10 or $20 less is counter-productive. Better to take a slightly lower margin on an item than add another resource.

Second, shipping of product becomes far easier and much less expensive because more merchandise can be shipped at one time which will result in lowered freight rates.

Third, fewer resources allows for more efficient flow of merchandise, which may mean lower inventory levels.

Fourth, using fewer resources allows retail sales associates to become more proficient and knowledgeable about each vendor. It will only help them sell more effectively.

Finally, by limiting the number of resources, as already pointed out, the dealer will become more important to each vendor.

New buyers will benefit by accepting, at least considering, buying from as few vendors as possible while maintaining a complete and divergent selection.

If your company has new buyers or buyers that might be more effective I may be able to help. Email me at jim@furnitureindustry101.com or call me at 727 347-1201.

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