Buying power

How has your approach to buying changed since the start of the recession?

Mark: A lot of independents are buying products from supermarkets, rather than wholesalers or symbol groups, because it is cheaper. With my Bargain Booze store, I am loyal to the group, but with my two unaffiliated stores I shop around. You can get baby wipes on buy one, get two free from the Co-op near me. No wholesaler will offer you that deal.

Chris: I still use Nisa for the bulk of my ordering, but I shop around a lot for alcohol.

Shailesh: I’m definitely looking for more deals. Customers want offers. We just phone the cash and carry now and have the order picked up as it’s cheaper than having it delivered, which is what we used to do.

Manny: I order three days a week from Londis, but it isn’t aren’t always the cheapest. If I adopted its pricing I’d lose a lot of customers, so I also order from Bestway, as well as other suppliers. I used to go to Dhamecha Cash & Carry, but it was four or five hours dead time away from the shop. The savings aren’t there when you weigh up the cost of your time and vehicle wear, so I’ve had to change my ethos. Bestway delivers, which is ideal as the prices are better.

Do you think wholesalers have reacted well to the economic situation?

Mark: Wholesalers realise that supermarkets are marching in and crushing the market, particularly for seasonal goods - Tesco will sell Quality Street at £5 a tin, which wholesalers can’t match. However, one thing wholesalers have got much better at in recent times is informing you of products and offers. They’re using the internet to flag up deals. When they get in touch, it’s no longer ‘Dear Sir’, but ‘Dear Mark’ - they want to show that they value your custom.

Chris: Yes, Nisa promotions are still going well - their prices beat other wholesalers.

Shailesh: I think they have. There is immense expectation and they are trying their best. They have to come up with good deals to remain competitive.

Manny: Dhamecha hasn’t reacted as I wanted. I was spending £6,000 a week there, but they don’t do deliveries and other wholesalers do, so I’ve changed to Bestway.

Is buying in bulk still a good tactic, or does it tie up too much capital?

Mark: You’ve got to ensure cash flow, so I don’t buy lots in bulk. I was recently offered a pallet of Stella Artois at a very good price. I’d definitely have saved money in the long-term, but I didn’t want to tie up the cash and I don’t have a lot of storage space.

Chris: Buying in bulk is still beneficial, especially when you’re getting it delivered.

Shailesh: It does tie up a lot of money, but sometimes I buy soft drinks and alcohol in bulk as they are fast movers.

Manny: For a small shop it isn’t a good tactic. After all, where are you going to store everything? I do have some storage capacity if beers or products such as Coca-Cola or Red Bull are on deal. They are guaranteed good sellers. I wouldn’t take a risk on a short-dated item, though.

What’s the best deal you’ve ever done with a supplier?

Mark: I did a deal with a wholesaler on Hardy’s VR Wines. Normally, you’d be happy to get your margin percentage in the high 20s when the product isn’t on offer. With this deal, I was achieving in excess of 35%.

Chris: I got a case of Carling for £13.99, which is normally £15.99. I buy every beer I stock on deal.

Shailesh: I look for deals on near out-of-date goods. I did this most recently with Stella Cidre. We usually sell it at £1.99, but we bought some at 55p and were able to sell them for £1.

Manny: I got 10-packs of Coke at £2.50 instead of £4.99.

If you get a good deal from your supplier, do you pass the savings on to your customers, or use it to shore up your profitability?

Mark: It depends on the product, but generally I return some of the offer to the customer by putting the product on promotion for two weeks, and then if I have residual product I’ll sell it at the standard price and make a higher margin.

Chris: I pass on most of my deals to customers. If I can sell it cheaper then it tends to go faster.

Shailesh: I’ll try to pass on a saving to customers. I had a pallet-load of Birds Eye Instant Custard 3kg catering packs. I bought them for 50p and sold them for £1. It was a good deal for customers and I made £150.

Manny: Londis advises putting items bought on promotion on deal for two weeks and then put the prices back up to normal. But when you move prices up and down customers do tend to notice, so you have to be careful.

How do you ensure that you are always getting the best deal?

Mark: I check prices online at different wholesalers and shop around to get the best deal.

Chris: I’m not chasing suppliers these days - they’re ringing me up with the best deals.

Shailesh: It’s very difficult. You can’t go to every cash and carry looking for deals. You have to make it clear to wholesalers that they need to give you a good deal, or else!

Manny: I talk to reps and get an idea of what’s available - it’s a case of suck it and see.

What’s the secret to good negotiating?

Mark: It’s much easier to negotiate if you buy in volume. If you’re a group of more than 20 stores, then you’ve got some leverage. For smaller stores, it’s a case of fishing around for deals and getting to know people at the wholesaler. That way, when there’s a deal in the pipeline, they’ll give you a heads up.

Chris: You can haggle with prices. Say: ‘I’m already paying 20p cheaper for that elsewhere’. If Nisa is selling beer at £15.93, I can get it for £13.50.

Shailesh: You can’t negotiate on everything with wholesalers if you only have one shop, but if you ask you do get. With beers, wines and spirits, I might tell them: ‘This is 50p cheaper elsewhere’ and see if they are prepared to move on price.

Manny: Be honest with suppliers - if you can get the product cheaper elsewhere, then let them know and see what they say.

Have you ever fallen victim to a deal that was too good to be true?

Mark: We’ve all bought something that we thought was going to go like a train and it stopped at the first station! Carling has just withdrawn Carling Chrome. It launched it like it was going to be the next big thing and hasn’t taken off. Having said that, its other new product, Zest, has performed well, so it’s not always easy to tell.

Chris: The only thing I go overboard with is alcohol, which has a long shelf-life, making it low risk. With other categories, if a deal seems too good to be true, it probably is.

Shailesh: I can’t say that I have. Sometimes I end up with leftover goods, but nothing too problematic.

Manny: We bought in a lot for the Olympics, but it didn’t sell and we got lumped with it.

What advice would you offer other retailers when it comes to bagging a good deal?

Mark: Read the press and keep up to date with new products. You’ve got to find out which products are being well marketed. For example, products such as Cadbury Bubbly, Mars Caramel and Walker’s Ridges have been all over the trade media and you know they’re going to be on TV and in magazines. So when you are offered a deal on this type of product, it is worth taking advantage of because you know that it is going to sell well for the first few weeks as consumers will want to try it out.

Chris: Alcohol is an area where you can make a lot of money. Get it as cheap as you can and put a deal on it. Also, don’t spend all your time chasing rainbows at the cash and carry - it’s better to get deliveries.

Shailesh: It’s a competitive market and retailers need to remind their suppliers that they can vote with their feet.

Manny: Reps are not the enemy. Some retailers are so stubborn and they won’t listen, but they need to remember that reps have big companies behind them that can help you.

Do some products warrant spending more time shopping around for a good deal?

Mark: You get a lot of movement on off-licence products and the margins on alcohol are getting squeezed all the time, so it’s important to buy well.

Chris: It’s not worth spending three or four hours online, or a day in the cash and carries, trying to save pennies here and there. You might save 30p on an order, but it would cost you £20 in petrol. Alcohol is worth shopping around for, though, because it is a premium-priced product with high margins.

Shailesh: Tobacco can be quite a large proportion of your shop sales, so you have to buy that well.

Manny: I go for pricemarked tobacco. The margins are low, but it gets people in the store. Soft drinks, energy drinks and crisps are always worth buying well - products that people eat every day are worth getting on deal.

Is your loyalty to a symbol group or wholesaler affected by the need to buy more cleverly?

Mark: Most people aren’t going to come out openly and say they don’t buy as much from their symbol, but it is happening. All the groups are pushing members for more loyalty, but lots of people are going to Costco, Booker, Makro, and even Poundland for cheaper deals.

Chris: Alcohol is the only area where I’ll look outside of my symbol. You can get a case of wine £6 cheaper and Fosters and Carling £3 or £4 cheaper per case by shopping around.

Shailesh: Some symbol groups will suffer from a drop in loyalty, but I don’t think Lifestyle Express will be one of them.

Manny: My purchasing from Londis has dropped. Even with the reward scheme the benefits weren’t able to outweigh the savings I am getting from Bestway.