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Do retail shops have to purchase all their inventory ahead of time or are there any situations where the stores can stock inventory and pay later down the road? Such as once it's been sold? Is that a common retail practice to allow retail stores to carry more products and inventory than they could otherwise afford?
Where do most everyday local retail shops get their products? From wholesale distributors or manufacturers?
Also my plan is to hire experienced sales people as I have no sales experience. Is it common to be able to take someone with prior sales experience and train them on your products and have them be a successful & knowledgable salesman? And are sales people generally paid a set salary or are they commission based? Does offering sales commissions provide a cost effective sales boost by encouraging salesmen?
Does anyone know of any quality internet forums discussing offline & online retail trade?
Thanks
Tom
But I would think long and hard about it first. We have both - our B&M store has been around since the late 70's.
As of 2005 first quarter, we sell 80% of our goods online or from online generated calls, by phone. Our B&M store generates about 35% of the profit (slightly higher margins, installations, etc), but eats about 50% of the overhead. Rent on office & vehicle expenses are our two main expenses that are B&M only.
But the real question is whether or not you can generate enough walk in traffic. I think that is the first thing you have to consider.
On the other hand, we are finding lately that our B&M store is actually generating online orders. Some guy sitting at home across town does not feel like driving, so just hops on his computer to order.
But the high product price raises a problem with inventory. Stocking a decent amount of products could easily cost in excess of $1M. Which is why I ask if retailers ever have the opportunity to stock the products without buying them upfront. Does anyone know if this is a common retail practice?
Tom
At one point a shopI workedin had around £100K worth of stock that wasnt theirs, although we part of a large chain turning over £400 Mil a year.
So I guess it was worth it for the suppliers.
How complex is your product? Thats the big question as to whether or not you hire experienced staff or newbies and train them up.
Do retail shops have to purchase all their inventory ahead of time or are there any situations where the stores can stock inventory and pay later down the road? Such as once it's been sold? Is that a common retail practice to allow retail stores to carry more products and inventory than they could otherwise afford?
It all depends on the norms for the particular industry. The most general case is that retailers pay for their goods on 15 or 30 day terms. New retailers may find it difficult to get lines of credit from some vendors, and may be stuck paying by credit card or COD.
In some industries, allowing unsold inventory to be returned is the norm, in others it never happens.
Manufacturers and distributors aren't banks though, and sending more industry than a vendor could afford to pay for is going to be the exception rather than the norm.
Where do most everyday local retail shops get their products? From wholesale distributors or manufacturers?
Also very industry dependent. In my particular industry (I'm on the wholesale rather than retail side), goods are generally received from the manufacturer rather than middlemen. In others, the manufacturers prefers to deal with distributors.
Your best bet is to call one of the manufacturers of goods in your space and ask to speak to the rep for your state/city. Give them a basic overview of what you are looking to do and they will tell you whether you need to talk to them or to a distributor.
Also my plan is to hire experienced sales people as I have no sales experience. Is it common to be able to take someone with prior sales experience and train them on your products and have them be a successful & knowledgable salesman? And are sales people generally paid a set salary or are they commission based? Does offering sales commissions provide a cost effective sales boost by encouraging salesmen?
It is not common to be able to take someone off the street and train them to be a talented salesperson. That's why talented salespeople make so much money - its a seemingly simple and straightforward job that is remarkably difficult.
For example does every large town's local TV store (not the big chain stores) purchase all their inventory or get it on loan?
Also does anyone know how much salesmen in the USA make? Seems to me it would be a $10-$15 an hour job for a good one.
Also what is the typical markup for medium to high dollar electronics? I referenced a large TV in one of my distributor magazines and the price was $1100 less than the local electronics store. Is that a common markup? Seems quite steep.
Tom
I thought you said that your products were pricey? If thats the case your going to need skilled sales staff and well paid ones.
try phoning around your local recruitment firms - tell them what your looking for and have them suggest a pay rate.
If you have pricey products, esp in the $20k range, you just want demos of these products, then stock the cheaper products. I was in Best Buy one time when a guy came in and bought 6 plasma screens for his new mansion. All Best Buy had was the one on display, but he had no problem plunking down that credit card for a delivery that would take place in a week verses that day.
I don't currently sell these products online and have no solid distributors lined up.
Seems like you could get up and running for a reasonable investment. Hire a few good sales people, buy some select inventory and custom order the rest when needed. But it would sure be nice to stock more inventory and demo models without having to fork over all cost up front. But I see how any distributor/manufacturer would be hesitant to provide credit to any new retailer.
In my eyes a good salesmen has the sweet talking ability and just needs the technical training. Hardly a highly skilled trade. But again, they are crutial to success, so maybe their ROI warrants a good wage.
There's a lot more to sales than sweet talking. If you don't know much about it, then you'll need to learn before you start hiring and training people. Sales is the lifeblood of any business, and its an area where mistakes can sink you quickly. (Amazon should have plenty of books on the topic.)
Its hard to know what sort of sales people you'll need and how much to pay them though without data that only you have. Do you expect customers to have already formulated a decision to buy your products when they walk in? If so, then its a matter of convincing them to buy from you rather than the guy down the street. If your customers have not already decided to buy, then you'll have the much more difficult job of convincing them to part with their money.
Another factor of compensation is how much you expect each sales person to sell per year. If a salesman is expected to sell $100,000/year in merchandise, the pay rate maximum is much lower than someone who is expected to sell $2,000,000/year.
As far as being able to get manufacturers to send you high priced merchandise on consignment, I probably wouldn't get my hopes up. You may be able to get some to finance it for you, but even that isn't a sure thing. Getting the local janitorial supply company to give you net 30 can be a challenge for a new business, getting significant credit from vendors is really going to be an uphill battle.
Bek.
Does anyone know if this industry is common for receiving inventory on loan from the manufacturer or distributor?
Very rare, especially with the major manufacturers.
Occasionally for new technology, which the manufacturer needs to be seen in the high street you might get one demo unit at 30% off the normal trade price.
Also what is the typical markup for medium to high dollar electronics?
Typically 20 to 25%. Authorised dealers, who buy direct, not through wholesalers will get retrospective turnover discounts of 1 to 5%, and support with advertising on a 50/50 basis.
The biggest problems for B&M electronics stores are:
1) Customers who use them to gather information, and then buy on line.
2) Manufacturers who insist that they must service products bought on-line, but won't pay sensible labour rates.
3) On line retailers who sell below the manufacturers 'trade price' i.e. cheaper than they can buy.
Generally B&M stores also have to consider the following:
Position versus Cost
To acheive reasonable sales levels, you need high footfall, i.e. a good position on the high street or retail park. Which means high rents and rates.
If you go for secondary shopping areas, side streets, bad neighbourhoods etc. your rent and rates will be lower, but you will have to spend much more on advertising to attract customers.
Cost of expansion
As sales in B&M stores increase so do staff costs and the cost of larger premises etc.
Costs don't increase as quickly on-line. You can be based on a cheap industrial estate, and employ low paid staff to handle packing and despatch.
Cost of stock financing
B&M businesses must have the goods in stock for display and demonstration, and most customers also expect immediate delivery. This ties up lots of money! If you turn your stock over 4 times a year, products are in stock for 90 days, manufacturers want paying in 30 days!
Many of the most successful on-line retailers don't carry stock. When you order, they take your money, put it in the bank, and order the goods from the manufacturer, 30 days later they pay for them. Positive cashflow, they are earning interest! this is how many of them make their money.
