Apparel retailers buy products from brands that they sell to consumers. Their business model is based on the consumer desire for stylish and fashionable clothing. The retailer stocks their store with clothing from one to a variety of brands.
Retailers work with brands to sell their products in two primary ways. The first is through a consignment agreement. In this situation, the retailer brings their own inventory to the table and buys the products from the brand.
A consignment agreement is a type of retail contract between a retailer and a vendor, approving the retailer to sell a supplier’s merchandise. A vendor, typically a manufacturer or third-party distributor, transfers ownership of goods to a retailer that will then inventory the items. The retailer then markets and sells the merchandise on the supplier’s behalf. The supplier will typically pay a commission on the retailer’s sales as part of the agreement.
The supplier is then responsible for selling the goods across various retailers as part of its overall sales strategy. Retailers may work with multiple vendor partners in turn, for example, an American shoe store may sell a range of international-branded footwear.
Within this agreement, the retailer can guarantee its own margins and recordkeeping, while the manufacturer gets the assurance that its goods are being sold, and does not have to deal with shipping and returns. Though this type of agreement is a common solution for small to mid-size retailers, it may also be used by large manufacturers who want to direct sales to various retailers.
Cooperative Advertising Arrangement
The second is through a co-op or cooperative advertising arrangement. The brand pays the retailer a flat advertising fee to market its products.
A cooperative advertising arrangement for retailers in apparel occurs when goods bearing the same name are being promoted collectively by two or more competitors of that product. For example, if Nike puts on a sale, then their directly competing partners are required to have the same sale prices for that designated time frame.
For apparel, the goods being promoted might be anything from a certain style such as ballet slippers to a certain color or type of fabric (plaid, corduroy, etc.). Sometimes the terms of the promotion will require that all the apparel sold must be from the designated labeled stores or team members. In these cases, it can be harder to tell that cooperative advertising arrangement is happening, and sometimes the arrangement is not as strictly followed.
Before reaching out to suppliers, there must be a serious amount of research done on them to be able to match their personality and facilitate the ability to communicate. Different vendors will meet the buyer in different ways, from simple phone calls to in-person meetings. Some will be professional and others might or might not be in some cases rely on distributors or agents to interact with the buyers.
It is however important to have a clear understanding of how the vendor interacts with their buyer or even to be the buyer at all times. This means that one must preempt “No” answer and find out through research or preparations for meetings and other interactions with him. Alternatives should be laid out and the buyer should be ready with all the details including the figures and the products dispatched.
Managing your vendor relationships is going to be a crucial aspect of your business. With these various relationships to consider, it’s up to you to decide which would be ideal for you. To manage such an important process effectively, a pos system with vendor management baked in will make your life easier.