Brick-and-Mortar Retailers: How to Negotiate with Brands & Make Terms

Recently, an interesting conversation with a young business owner brought some important ideas to mind when it comes to the trials brick-and-mortar retailers often face. 

She was in the process of opening up a new lingerie store in the Midwest, and when we asked her how things were going, what her first collections looked like, and how things were shaping up with her storefront, she answered: “No one is willing to sell me their product because I have no history of opening up retail stores.” 

She had found herself in a bit of a conundrum—and unfortunately, a common one for new small business retailers. 

The fact of the matter is that as a young business owner, it can be challenging to establish your creditworthiness. In this post, we’ll answer frequently asked questions for brick-and-mortar retailers, go into detail on how to successfully navigate your first vendor negotiations, and discuss how to get products inside your new retail store.

Brand DNA

What do you do if you want to open up a retail store, but you don’t have the history as an entrepreneur or a business owner to be able to negotiate and get those goods?

First, take a good look at what you have on your side from a negotiating standpoint: what materials you need in order to be able to close the sale, how to get around the topic of exclusives, how to get new products into your store—as well as payment terms and creditworthiness.

But, before you get started pitching and going to market, it is imperative to begin with a Brand DNA. What does your brand stand for? What is your pitch deck? To whom are you speaking to? What are the customer and the assortment looking like? 

It’s essential to have a full 360-degree idea of the logistics and brand marketing opportunities that you are going to be presenting to this new vendor. For example, is it that you’re opening up a store in a unique neighborhood where there isn’t any other competition? Is it that you’re opening up a new kind of direction, or is your business model somehow unique and special? Identify what that power is going to be for your small business so you can define your voice. 

People will often say, “Well, isn’t every market saturated?” What we like to say in reply is: Yes. Markets are saturated, but there are undersaturated voices. What is your voice that your brand will put forth into the market? 

Credit History & Factoring

What steps should I take to establish creditworthiness? 

Once you establish what your profile and Brand DNA looks like, make sure that you apply for your business tax ID, your resale permit, and start to build your creditworthiness as a small business.

That credit history is significant and leads to the second step when it comes to pitching to new vendors: sending over documentation around your positioning and how you plan to really open up and expand the market in your area. 

How does factoring work? 

Factoring is something that is usually left to bigger retailers; however, there are also instances when small retailers will ask to be factored. Factoring is a financial transaction and type of debtor finance, where you will have a credit check against your business with a third party company.

Brands prefer to use factors because it helps them bypass chasing after invoices. Also, retailers prefer factors because it allows them to take advantage of net terms. 

Net Terms

How do I negotiate better payment terms with my suppliers? 

When it comes to net terms and how you establish net terms, there are some pretty fundamental ways of getting started. As a small retailer, chances are you will be paying for invoices with your credit card, or you might be agreeing to pay 50%  upfront and 50% of upon delivery, or upon shipment. 

There are other options available and open for negotiation. You could suggest that you would like to pay a net 15 or even net 30. What exactly does that mean? Simply that 15 days after the goods arrive, you, as a retailer, are due to owing your invoice back to the brand, or 30 days after the goods arrive, you pay off that vendor.

For new businesses, the challenging part is that you can’t take advantage of many of those terms without showing credit history and creditworthiness. So, when it comes to negotiation, keep in mind what can you offer to a brand. Could you do 50% down and maybe a net 30%-50%? If you start to understand your options, there’s room to be flexible about what those payment terms can be. 

Showrooms & Vendor Meetings

How can I conduct myself in a market-appropriate way so a brand will take me seriously?

There’s no other way to say it: some real rookie moves can be easily avoided when it comes to meeting with new brands. Often, young store owners will walk into a showroom or meet a new brand and instantly say, “I love everything, I love this brand; everything looks great.” But from the brand’s perspective, what does this tell the vendor? 

This sort of attitude may suggest that some negative connotations, that you may now know what your customer wants, that you don’t know how to discern between what a best seller might be or identify something that is not going to be moving.

Why does this matter? How can I prepare myself? 

Your vendors don’t just want to sell products to you once; they want to be selling products to you over and over again. So, when you walk into a showroom or buyer appointment meeting, make sure that you’re armed with what exactly it is you’re looking to buy. Consider bringing a mood board, a classification, or an open-to-buy plan for your business. Then, you’ll be able to speak intelligently about what key items you think will work for your business. 

Online & In-Store Exclusives

How do I land online and in-store exclusives with a brand?

To score exclusives, you’ll have to consider what you have to offer a brand. Chances are you might have to order specific minimum units, or you might need to buy multiple units of a particular color or fabric—whatever it is to make it exclusive and to get a brand to say “yes.” 

Another advantage you may bring to the table is if you are a new business in a particular region, and you can ask for exclusives on distribution within your specific market. 

Recently, we helped to open up a store in the Middle East in Bahrain, and what was so fascinating about opening up the store is that it ended up being exclusive to many brands for that particular market. There weren’t exclusive colors or exclusive styles, but the business was able to capitalize on having exclusivity within Bahrain. This type of exclusivity is a huge selling point if you are a new boutique within your region and have a unique point of sale and distribution model. 

In closing, when it comes to negotiating with brands and setting terms, it’s all about positioning your brand, providing lots of information, building your credit history, and walking into those appointments with a clear point of view (and knowing the financials and product categories that you’re looking to hit!).

And remember, nothing is set in stone: you and your vendors will work together to create what your payment terms can look like. You might be surprised to discover that small vendors can be quite flexible, so be nurturing with them. Safeguard your relationships by making sure that you have contracts in place to protect both of you as you move into launching and opening up your store. 

For more information on how to successfully build up your wholesale business, make sure you check out our article on Wholesale Lingo. There are many unique terms and terminologies when it comes to negotiating and setting up business models. 

And, make sure you check out our download on Product Pricing, a How-to. This is extremely important as you look to go into the wholesale market, build up your assortment, and then start to figure out what those markups can look like. Yes, you have some standardized markups and MSRPs across vendors, but often you also have a little bit more wiggle room when it comes to pricing than you think you do.

If you have questions on business modeling, marketing, and how to drive traffic to your new retail storefront, we would love to help you. Call us at 310-957-5264 to schedule a consultation session or email hello@scalingretail.com. One-on-one support from seasoned industry professionals awaits!

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