Buying Right Is Almost Always More Important than Selling Right
Buyers at companies, both large and small, are often woefully underpaid and underappreciated. Even the folks whose job it is to do reorders after product decisions are made can have a major impact on sales, profits, and customer service.
Let’s start by creating a few additional headlines that you can take away from this page:
Buying the wrong product reduces sales
Buying the wrong product increases inventory and costs related to shrink
Buying the wrong product has a negative impact on customer perception
Buying too little of a product hurts sales and customer service
Buying too much of a product eats into precious cash flow and increases potential shrink
Buying at too high a price eats into margins or hurts competitiveness
Buying at a better price than the competition helps margins and/or competitiveness
Buying defective products ……
Buying from companies who do not offer great shipping and financial terms can hurt cash flow and competitiveness
Buying from companies who don’t protect their resellers against unfair competition will hurt sales
Buying from companies who are inconsistent in delivery times can hurt sales, profits, and customer service.
This list could be longer. But here is one more headline that might really make some people think twice. Buying a product 5% cheaper is more profitable than selling it for 5% more. The margin on the first will be 55%. The margin on the second is only 52.4%.
Let’s be real, however. You want to sell as much product as you can for as much as the market will bear. This is often hard to determine, but most good businesspeople are constantly contemplating the sell price against the competition or the overall market for the product. This is good business practice, no matter what price you buy the item for.
However, none of those conditions impact your buying price. If you buy it 5%, get free freight, haggle for 60-day terms, and/or get various kinds of allowances, those are yours to keep, regardless of the selling price.
If your buyer has the right data that allows you to turn your inventory six times a year with no significant outages, rather than three times a year, those savings go right to the bottom line.
If you don’t buy duds, you don’t end up having to discount the duds to get rid of them, use valuable space to store them, or lose additional value as they deteriorate or become even more obsolete or out of fashion.
Buyer complacency is a major problem with almost all companies. Whoever is responsible for buying often ends up being friends with the salespeople of some products and services the company buys. These buyers are reluctant to ask for better deals or to shop around. Complacent buyers will generally overbuy and will occasionally fail to buy enough or any at all.
Everyone who has responsibility to buy, and especially those who hold that title should be hired with the needed skill sets and attributes in mind:
Buyers can steal from you. Buyers can take bribes. Buyers often play favorites for favors. You should be looking for folks with the highest provable levels of integrity.
Buyers often fight uphill battles to “sell” the new products or services they have discovered to their associates and bosses. Salespeople are particularly difficult as they want new things to sell, but are hyper critical when buyers bring new items to the table.
The buyers position is all about numbers. They need arithmetic, not higher math, but their skills in handling percentages, fractions should be tested. They also need excellent analytical skills.
Last, but definitely not least, buyers need to be good at negotiating. Hire individuals with at least some understanding or experience in negotiating, but also make sure they are reading or doing online tutorials to increase these abilities.
IDEA!! We incentivize salespeople. Why shouldn’t we incentivize buyers. Why shouldn’t pay increases and bonuses be based on improvements in turns, outages, prices, and even margins.
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