Opening Order Terms – What Are Yours?

Setting up your opening terms is often a struggle. Do you set it by price or by quantity? What about re-orders? How about credit checks? There are many points to address when setting up your opening order terms and while many companies choose to be flexible, it is also important to respect the terms you set in place. Below are some points to consider.

How Much?

There are a variety of ways to secure orders. Choose what is best for your business.

1. Set your opening order according to total value of wholesale cost. For example, you may say that opening orders starts at a minimum of $500.

2. Set your opening order according to total case packs. Case packs refer to a certain number of specific goods sold at one price for all the units within the case. If you sell apparel t-shirts, for example, you may have a case pack of one extra-small, two smalls, one medium and two large shirts. This totals six units which equals one case pack. Make sure you are very clear as to what each of your case packs consist of. Try and keep the quantities within your case packs consistent to avoid confusion with your clients.

3. Set your opening order according to total quantity of units, such as four pieces. This is a good strategy for products with higher price points, such as art or furniture.

4. Set your opening order according to nothing. That’s right – nothing! By setting no terms, you are allowing complete flexibility in the ordering process. However, for most companies this is not an effective way to manage their time, inventory or investments. This typically only works for custom work or higher priced items and should be carefully considered before setting into place.

Who Is Qualified?

While the below points are all something to consider for your business, you should also consider which are valid for your business to put into effect.

1. Check company credit prior to producing orders for them. It is legal to check for secure credit by processing a business credit check as a vendor. Speak with your preferred credit company to secure more details on this process.

2. Confirm there is no immediate competition with your other clients that sell your product for new accounts.You may want to set in place a 1 mile rule or something of sort to keep your retail clients happy by not over-saturating their neighborhood with your product in different retailers. Depending on your product, this will vary.

3. Set trial periods for retailers who sell your product according to sell through success. If your product is in demand and you want to only be in the best retailers, it’s fair to tell your retailers that there is an expected re-order rate based on sales for them to continue selling your product if they are exclusive to that specific area. Retailers may have the best intentions to sell your product, but if they aren’t, it’s fair for you to stop shipping to them, also. Make sure you make them aware of this in advance, of course!

What About Re-Orders?

Re-orders are what keep businesses alive. It’s important for you to gain re-orders, so as a result you want to give your retailers the opportunity to get more of your product more comfortably than the first time around.

1. One out, one in. You can set your clients up with the opportunity to automatically have new product sent to them once one of their current product in their inventory is sold. Typically this works well for hard goods, such as picture frames, rugs, high chairs and other products that are not based on a specific size (such as apparel or footwear).

2. Set in place a quantity of total units or total case packs allowed for re-orders. For example, you may say you need at least two products in order to place a re-order or two case packs.

3. Set in place a monetary number for re-orders to be placed. Maybe $200 is your magic number. Whatever your number is, make sure it is less than opening orders so that retailers are more inclined to make this purchase.

4. No minimums at all! This is great if you can afford to process single unit orders (and expect this if you set this in place) and invest the time it will take just to deal with the re-order communication. Remember that it does take time, so consider this when setting up all your terms.

Extra, Extra

If you plan to charge for shipping, let your retailers know – and tell them how much as well as who is shipping your product (UPS, Fed Ex, etc). If certian colors are off limits for production reasons or re-order purposes, let them know. Anything that adds to the order terms, LET THEM KNOW! Nothing is worse than surprising your retailer with additional information that may result in lack of trust or respect and possibly severed business. Be clear on all your terms with a clean, professional document that is included in your Buyer’s Packet. Make sure to have your retailers sign a partnership contract, as well.

Finally, be open to your own unique needs. Each wholesaler is different and deserves to respect their brand and product respectively. Learn about what your competition is doing and try and be flexible with the economy, as well. One way of doing this is offering show specials to your clients (if they attend a trade show, they may get a discount, for example) or offer other incentives that can help make the sale for you. Free shipping on opening orders is always a good one.

Still not sure which direction to go for your business? Let Retail Minded help you! Contact Retail Minded at nicole@retailminded.com for customized support.