How to work with your distributor rep: credit, deals and when to push back

For many small shops in Jamaica and across the Caribbean, the distributor's rep is the main link to a supplier. The rep decides how quickly your problems get fixed, whether you hear about promotions early and whether you are offered credit. They also visit dozens of shops. The ones they enjoy visiting get the benefit of the doubt.

That does not mean being soft. It means being someone the rep can plan around: clear about what you want, honest about what you can afford and reliable on payment. This guide covers how to do that, which deals are worth taking and when to push back. The mechanics of the order itself are in ordering from route sales reps.

• Be ready. Have your order prepared when the rep arrives. A rep who spends five minutes with you rather than twenty has more time to give you good deals.
• Be consistent. Order on a regular rhythm. Reps remember steady shops, and some will protect your stock when supply is tight.
• Be clear. Give quantities in cases or units, and confirm them back.
• Be honest. If cash is tight this week, say so and order less, rather than ordering more than you can pay for.
• Be fair when things go wrong. Report problems promptly and calmly. See short, damaged or substituted deliveries.
• Say thank you. When a rep fixes a problem or squeezes in an extra delivery, mention it. It costs nothing.

Many distributors let known shops pay a week or two after delivery instead of at the door. This is very useful: you can sell part of the stock before you pay for it. It is also a loan with a deadline, and the rep is personally accountable to the distributor for what you owe.

Here is how it works with numbers. You order $600 a week on 14-day terms. Rather than paying $600 each week from your own cash, you pay each invoice two weeks after delivery. In steady state, you are always carrying about two weeks of invoices, around $1,200, that you have not yet paid for. That is $1,200 of stock funded by your supplier rather than your pocket.

The reverse is also true. If you fall behind, the usual consequences are being put back on cash-on-delivery, a lower credit limit or being refused new orders until you clear the balance. Losing credit on a $1,200 balance means finding that cash at once.

1. Know the exact terms

   Ask: how many days, from invoice date or delivery date, and is there a credit limit? Write it down.

2. Set aside the money as sales come in

   Treat the amount due as already spent. Put it in an envelope, or a separate account, and do not use it for other things. See cash flow for shop owners.

3. Pay a day early, not a day late

   Ask how the rep collects: cash on a visit, a bank transfer or at the depot. Pay in the way that gives you a receipt.

4. Keep proof of payment

   Always get a receipt or transfer confirmation, and match it to the invoice.

5. Talk early if you cannot pay

   Tell the rep before the due date, with a plan: part now, the rest next week. Reps can often help if you are honest, and rarely do if you vanish.

Reps often have an offer to move: buy ten cases and get one free, a lower price this month, a branded display stand with a bigger order. Some are great. Others just move the distributor's slow stock onto your shelf. Test each one with three questions.

1. How long will the extra stock take to sell? Divide the quantity by your weekly sales.
2. What does the saving amount to? Compare the new cost per unit with your usual one.
3. Can I afford to have that cash tied up? Think about the next four weeks of bills and orders.

Worked example: ten cases, get one free

A product costs $18 a case. The offer is 10 cases plus 1 free, so 11 cases for $180, or about $16.36 each. You normally sell 3 cases a week and buy 3 cases at a time.

You save $18 but tie up $180 for nearly four weeks, $126 more than usual. If that product is a steady seller and you have the cash and the space, it is a decent deal, a bit under 10 percent off. If the product sells slowly, or the $126 would have funded something faster, it is not. For a product that sells 1 case a week, you would hold the stock for 11 weeks, so the free case is paid for in months of tied-up cash.

Deals usually worth taking

• A price break on a fast, steady seller you will sell within a few weeks.
• A deal that coincides with a known busy season. See how to plan for busy season.
• A trial of a new product in a small quantity at a better price.
• Free display material for a product that already sells well.

Deals usually not worth taking

• Big discounts on products that already sit on your shelf. Check your slow-moving stock.
• "Buy this to get that" bundles where the second product is the one you do not want.
• Anything that needs more cash than you can free up before the invoice is due.
• Display stands that take space from your best sellers.
• Deals on products with a short shelf life, unless you are sure they will sell in time.

Pushing back is part of the relationship. It works best when it is specific, calm and backed by your numbers.

• An oversized suggestion. "I have three weeks of that on hand. Put me down for one case."
• A repeated problem. If the same product keeps arriving short or damaged, show your log and ask what will change.
• A price rise. Ask when it takes effect, and whether you can order at the old price before then. See negotiating with suppliers.
• Pressure to buy to hit a target. You can be friendly and still say no. "I can do that next visit."
• Wrong invoices. Correct them every time, politely. Letting it pass once teaches the next error.

Put the other side first: say what you can do, then what you cannot. "I can take two cases of the new flavour this week. If it moves, I will order more." That keeps the door open and keeps you in control of your own shelf.

• Treating credit as free money and losing track of what you owe.
• Taking every deal to keep the rep happy.
• Avoiding the rep when you owe them money.
• Not writing down what was promised, such as a credit or a replacement.
• Depending on one rep and one distributor for everything. See distributor, wholesaler or direct.

Shopkeepa gives you the numbers to judge an offer. Best sellers and slow movers reports show which products can take a bigger order and which are already sitting, and your restock list gives a suggested order quantity to compare with a case deal. Stock In records the cost you actually paid, so gross profit per product, where cost is known, shows whether a deal helped your margin.

Learn more about sales and profit reports. Shopkeepa does not hold supplier accounts or track credit, so keep a note of what you owe and when. Shopkeepa is in development, and early access shops will help shape it.