Protect Yourself from Being Burned

By  Mark Lotstein, President, Retail Optimization Group LLC

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Let me start off this column by clearly stating that most vendors are honest, and they want to have a good business relationship that will be a win for you and them. With that said: Have you ever been burned by a vendor? It could be by a supplier of software, equipment or retail products. Over the years we have worked with so many clients who have been burned by their vendors, I would bet almost every retailer reading this article can think of at least one time it happened to them. Some examples of these situations:

Software did not have the functions you wanted and needed and was far harder to use on a daily basis than you were promised.

The purchase, setup and support costs exceeded the price quote and greatly inflated the overall price of software, hardware or other equipment.

Promotional discounts or rebates were based on purchases or product mixes that you never received or on which you were underpaid.

You expected marketing dollars, point-of-sale materials and other such campaigns to promote a product that never materialized.

You were guaranteed returns with a full refund, but suddenly that was no longer the case.

Sales reps made all sorts of promises but did not live up to them.

How to Stay Safe

Here are some tips on how to best protect your business, have a better relationship with your vendors and avoid any hard feelings or misunderstandings:

1. Always ask questions and never assume. Too often we are presented with a one-page overview or sell sheet with all the “necessary” information, and because we are so busy we just accept it. Start with some basic questions:

  • What are the payment terms?
  • What is the return policy?
  • What are the promotions for the retailer and the consumer that will be offered over the next year? How exactly do they work, and how will they be promoted?
  • Will there be any cost to me for these promotions in hard dollars or minimum purchase of product, or in higher product cost or lower margin?

2. Get it in writing. It is not legally binding or enforceable unless you have it in writing. Just because the salesperson or customer service person told you something does not guarantee it.

3. Make sure the contract is executed by the other company and you have assigned copy in your possession. The retailer may have signed it, but if it was not executed by the other party, it is not valid and cannot be enforced. We once ran into a situation in which a retailer had purchased scanning and back-office software, and the person who signed for the software company was the salesperson. When certain expectations were not met, the software company claimed it could not be held liable because the salesperson was not authorized to make certain promises, nor execute the agreement.

4. Make sure any contract is written in clear language and that there is an “out “clause for lack of performance that is simple to prove, with no room for misunderstanding.If something does not make sense or is not clear, ask. Finding out later that you are on the hook because you did not realize the meaning of something in the contract is not a pleasant experience.

5. Ask for references. For some reason, retailers seem to be OK with two or three references that are located halfway across the country. If a vendor can’t give you at least 10 references—in particular ones that are in your area and with whom you share similarities (same POS equipment, about the same number of stores, etc.)—there is an issue. You don’t want to get the three people who get a free product or are friends or relatives of the vendor, do you?

You should not expect to be burned often, but it is something that happens if you don’t protect yourself. Please do not fall into the trap of believing that it is just part of doing business. While the supplier company may be great, one bad employee can cause you a lot of problems. In the end, asking more questions, getting everything in writing and talking with references will help both you and the vendor have a longer, better business relationship.

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