When engaging with vendors, having a strong understanding of key terms can significantly impact the outcomes of your negotiations. Here, we expand upon a list originally shared by longtime (and retired) AGM supporter and keynote speaker Jim Dion, which covers a wide array of potentially negotiable aspects of a buyer-vendor relationship. Below is a detailed explanation of each term to help you navigate these discussions more effectively:
1. F.O.B. Terms
These terms determine who pays for shipping and at what point the ownership and risk of the products transfer from the seller to the buyer.
2. Better Cash Discount Terms
Negotiate for improved discounts for early payment, potentially lowering the overall cost of purchased goods.
3. Anticipation Allowance
This is a discount for paying invoices early, promoting better cash flow management.
4. Co-op Advertising Allowance (Spend as Desired)
A flexible arrangement where the vendor contributes to your advertising expenses, potentially increasing joint marketing efforts.
5. Returns: Damaged
Allows you to return damaged goods at no additional cost, ensuring you do not pay for defective merchandise.
6. Returns: In-bound Freight Reimbursed
The vendor covers the cost of shipping for returns, which is especially valuable for bulky or heavy items.
7. Returns: Blanket Authorization
Streamlines the return process by eliminating the need to seek approval for each return.
8. Returns: Sharing the Cost on Customer Accommodation
This term allows you to share the financial burden of accommodating customer returns with the vendor.
9. Returns: Immediate Replacement or Refund
Ensures quick handling of returns, either by replacing the product or issuing a refund swiftly.
10. Returns: Collect Return Transportation
The vendor bears the cost of transportation for returns, easing logistics and costs on your end.
11. Mark-down Money
Financial support from the vendor to help manage discounts and protect your profit margins.
12. Rep Visits
Vendor representatives visit regularly to provide product updates and support, ensuring effective merchandising.
13. Unit Control by Vendor (VMI)
The vendor manages your inventory levels through Vendor Managed Inventory (VMI), reducing your inventory holding costs.
14. Source Marking
Products are marked at their origin, ensuring their authenticity and traceability.
15. Pre-ticketing
Goods arrive already ticketed with pricing and barcode information, saving you time and labor.
16. Price Maintained (Long Term Price Guarantees)
Locks in pricing for a specified period, aiding in financial forecasting and budget stability.
17. Fixtures
Negotiate whether the vendor provides fixtures necessary for displaying their products at no extra cost.
18. Packaging
Tailored packaging options that can enhance product appeal or durability during shipping.
19. Selling Aids (Merchandise Tags, Instruction Sheets)
These aids are provided to enhance the customer’s understanding and handling of the product.
20. Promotional Material (Charge Inserts, Package Stuffers)
Includes materials for promotions that the vendor supplies, enhancing direct marketing efforts to consumers.
21. National Advertising Tags on Ads
Integrate your branding into the vendor’s national advertising campaigns to boost product visibility.
22. Links on Their Website to Yours
Securing a backlink from the vendor’s site can enhance your website’s traffic and search engine ranking.
23. Banner Ads on Their Website
Negotiate space for banner ads on the vendor’s website to increase your product’s visibility.
24. They Pay for Banner Ads on Your Website
The vendor funds banner advertisements on your website, helping subsidize your advertising expenses.
25. Vendor Promotional Program
Engage in promotional programs initiated by the vendor to boost sales and visibility without direct cost.
26. Rebates (Quantity Discount Over Year-Taken Quarterly)
A rebate system based on the quantity purchased over a year, providing financial returns on large orders, taken quarterly.
27. Private-Label Program
Collaborate with the vendor to create products under your own brand, enhancing brand loyalty and exclusivity.
28. Sales Salaries
Discuss whether the vendor contributes to the salaries of sales staff involved in selling their products.
29. Promotional Goods
Receive goods specifically for promotion at reduced or no cost to boost marketing campaigns.
30. Programmed Merchandising
Structured merchandising programs that align with your sales strategies, potentially co-developed with the vendor.
31. Product Liability Insurance
Negotiate coverage terms where the vendor assumes liability for product claims, reducing your risk.
32. Re-packing
Vendor handles or assists in repacking goods which may require specific packaging for resale or distribution.
33. Payment for Space
Compensation from the vendor for dedicated retail or storage space in your facility.
34. Sample Items for Demonstration Purposes
Obtain sample products for demos or trials at no cost, increasing customer engagement and potential sales.
35. Allowance for Manufacturing Defects When You Give to Customer
Receive allowances or credits for defective items passed to customers, minimizing financial loss.
36. Special Dating
Negotiate payment terms that align better with your cash flow needs, such as extended due dates or seasonal dating.
37. Advertising Mats (Glossies)
Receive ready-to-use advertising materials (like glossy prints) for local marketing efforts.
38. “On Memo” Goods (Consignment)
Items provided on consignment where you pay only for what is sold, reducing inventory cost and risk.
39. Free Goods
Goods provided at no cost as part of a purchase agreement, often used to incentivize bulk purchases.
40. In-store Demonstrations
Vendor-provided demonstrations in your store to help promote products and educate customers.
41. Return Privilege
The ability to return unsold goods within a certain timeframe, mitigating risks associated with overstocking.
42. Warehousing Discount
Discounts on products stored in the vendor’s warehouse, which can reduce your storage and logistics costs.
43. Stock-equalization Program
A program where the vendor helps maintain balanced stock levels across different product lines or locations.
44. Early-order Discount
Discounts offered for placing orders before a certain date, encouraging early commitment.
45. Guaranteed Sale
A guarantee from the vendor that goods will sell by a certain date or can be returned, reducing inventory risks.
46. Product-knowledge Training
Vendor-provided training to ensure your staff is knowledgeable about the products they sell, enhancing sales effectiveness.
47. Sales Training
Comprehensive sales training provided by the vendor to boost the effectiveness and efficiency of your sales force.
48. Use of Logo (and Compensation for Use in Advertising)
Negotiate the terms under which a vendor’s logo can be used in your advertising, including potential compensation.
49. Consolidated Shipping Discount
Discounts on shipping costs when orders are consolidated, reducing logistics expenses.
50. Exclusivity or First Shot on New Item
Secure exclusive selling rights or the first opportunity to sell new products, providing a competitive edge.
51. Payment for P.A. Announcements
Vendor compensates for public address announcements in your store, effectively using your in-store media.
52. Mention in TV Ads by Manufacturer
Get your store or brand mentioned in the vendor’s TV advertisements, increasing local recognition and traffic.
53. Live Models (Ready To Wear Business)
Use of live models for product demonstrations or fashion shows, often funded or provided by the vendor.
54. Back-up Orders
Ability to place orders for additional stock to be held by the vendor until needed, ensuring product availability.
55. Long-term Commitment Discount
Discounts offered for committing to a long-term purchasing agreement, locking in supply and pricing.
56. Manufacturer-paid Spiffs
Incentives paid directly to your sales staff by the manufacturer for selling certain products, boosting motivation.
57. Partial Shipments Are Pre-paid
The vendor covers shipping costs for partial shipments, facilitating more flexible inventory management.
58. Allowance for Designing
Receive an allowance for custom designs, whether for packaging, marketing materials, or product modifications.
59. House Account (Retailer Gets Sales Commission)
A unique arrangement where you receive a commission for sales made directly from a vendor-operated account within your store.
60. Individual Package or Label Design
Custom packaging or labeling provided by the vendor, enhancing product differentiation and appeal.
61. Listing Money (Special Promotions)
Financial support for listing the vendor’s products in special promotions or featured placements.
62. Testing in Research Lab Paid by Vendor
Vendor covers the costs of product testing, ensuring compliance and quality without impacting your budget.
63. Free Mannequins
Mannequins provided at no cost for displaying apparel or other products, enhancing in-store displays.
64. New Store Discounts
Special discounts or terms provided to support the opening of new retail locations.
65. Vendor Pays for Market Trip to Trade Show
The vendor covers expenses for attending trade shows, allowing you to explore new products and trends.
66. Charge Back Vendor for Errors
Ability to charge back the vendor for errors in fulfillment or product quality issues, safeguarding your finances.
67. Call Vendor Collect
Arrange for charges related to communications or order placements to be billed directly to the vendor.
68. Pre-pack Merchandise for Individual Ship-to’s
Vendor pre-packs merchandise based on specific destination requirements, simplifying logistics for multi-location retailers.
69. Plan-o-gram Assistance
Vendor provides assistance in creating and implementing plan-o-grams, which are detailed diagrams for merchandise layouts.
70. Increasing Volume Discounts Off Invoice
Negotiate higher discounts as your order volume increases, directly reducing the cost per unit.
71. Distribution Discount (in addition to warehouse discount)
Additional discounts on product distribution costs, further reducing overall expenses.
72. Market Share Information/Market Research
Access detailed market research and data from the vendor, aiding in strategic planning and product placement.
73. Size and/or Color Balancing
Vendor assists in maintaining balanced stock levels of different sizes or colors, optimizing inventory turnover.
74. Free Demonstration Merchandise to Be Returned After Use
Receive merchandise for demonstration purposes that can be returned after use, minimizing inventory costs.
75. Extended Guarantee Agreements for Customers
Secure extended warranty or guarantee terms for your customers, enhancing product trust and satisfaction.
76. Guaranteed Turn Performance
Vendor guarantees a certain level of product turnover, ensuring that stock moves at a predetermined rate.
77. Guaranteed On-time Delivery or Automatic Discount
Ensure timely delivery of goods, with an automatic discount applied for any delays, safeguarding against stock-outs.
78. Currency Guarantee at Today’s, or Lower, Value on Off-shore Buy
Lock in exchange rates for international purchases to protect against currency fluctuations.
79. Changes in Government Tax or Policy Covered by Vendor
Vendor agrees to absorb costs related to changes in taxes or government policies, preventing unexpected expenses.
80. Pre-assembly Allowance
Receive an allowance for any assembly required before sale, reducing labor costs on your end.
81. Bilingual Instructions (When Required)
Ensure products come with instructions in multiple languages if your market requires it, enhancing customer satisfaction.
82. Credit and Bill
Flexible billing arrangements that allow for credit terms that can align better with your sales cycles.
83. Distribution Discount
An additional discount provided for managing distribution logistics, helping to optimize supply chain costs.
84. Free EDI Software
Vendor provides Electronic Data Interchange (EDI) software at no cost, facilitating efficient and accurate order and inventory management.
85. Direct Link to Distribution System
Integration of your systems with the vendor’s distribution network for real-time inventory and order processing.
86. Free Web Site Development / Link
Vendor offers free web development services or link integration to enhance your online presence and connectivity.
Understanding and effectively negotiating these terms can lead to significant savings, improved efficiency, and stronger partnerships with vendors. This comprehensive list serves as a toolkit for buyers looking to enhance their negotiating power and achieve better terms in their vendor agreements