Buy from the company, or from a distributor?

Both are normal ways to buy. The company's rate is lower on paper. The distributor's rate arrives at your shutter, on credit, and he takes back what breaks. Settle it item by item: direct for the two or three names that move fastest, the distributor for the long tail of everything else.

The rate you see and the rate that lands in your shop

Ask a company depot for a rate and you get a clean number. It usually sits below what the distributor charges you, and it stays in your head all week.

It is not what the goods cost you.

The rate is only the first line of the price. Four more sit under it. The trip to the depot. The smallest order they will accept. The money you hand over before a single carton moves. And the weeks that stock stands on your floor before it turns back into cash. Add those four and you get the cost of one unit as it reaches your shelf. That is the only number worth putting beside the distributor's.

Say you sell a soap that comes forty-eight to a carton, and you sell about five cartons a month.

Say one carton of soap, bought both ways

Company rate on the phone, one cartonRs 4,200

Their smallest order is twenty cartons, paid the same dayRs 84,000

The van, the loading, a morning away from your counterRs 1,800

Two cartons crushed on the road, and nobody takes those backRs 8,400

So one carton, bought direct, really costRs 4,710

Distributor rate, five at a time, delivered, paid in three weeksRs 4,450

What his side saves you across the same twenty cartonsRs 5,200

Cheaper per carton, at these numbersDistributor, by Rs 260

Only an example, never a claim about a real shop or a real supplier. Change two of these numbers and the company side wins outright: nothing broken on the road, and twenty cartons cleared in three weeks instead of four months.

The company was Rs 250 cheaper on every carton and still ended up dearer, because of a van, a broken stack, and a smallest order four times bigger than your selling.

Now change two numbers and the answer turns over. Suppose nothing breaks on the road, and suppose those twenty cartons clear your counter in three weeks. Then the direct side wins outright and it is not close. That is the whole lesson here. Neither side is cheaper in general. One side is cheaper for one item, at your counter's speed, in your street.

Write your buying rates down where you can read them back a year later. Wasoolo keeps a buy rate against each product and a balance against each supplier, so "which one is really cheaper for this soap" is something you look up in ten seconds instead of something you argue about from memory. A rate you only remember is a rate that quietly drifts upward without anybody telling you.

The smallest order is what really decides it

For most small shops this ends the discussion before the rate is even reached.

A company sells in lots. Ten cartons, twenty, a pallet, a van load. The rate is built for a shop that turns that much over. If you sell five cartons a month and the smallest lot is twenty, they are asking you to buy four months of one item in one morning, in cash, in a shop where every rupee already has a job.

Half past six on a Saturday evening, Nasir climbed on a stool to reach the top of a stack. Twenty-two cartons of washing powder stood against the wall where he used to keep three, bought direct at a rate Rs 300 better than his usual. In five weeks he had sold four of them. The oil bill was due on Monday and the money for it was standing in that wall, in powder.

Nothing went wrong there. The rate was real and the goods were fine. He simply bought four months of one item with money that eleven other items needed.

Before you take a lot, do one small sum. Divide the lot by your monthly selling. If the answer is more than six weeks, the discount is not a discount. It is a loan you have made to a stack of cardboard. The choice between a big buy and little and often is the same question wearing different clothes, and a lot that stays too long turns into the stock that sits at the back and eats your cash.

The weeks of credit nobody prints on the rate list

A depot usually wants the money before the goods leave the gate. Your distributor, once he knows your face and your habits, hands over the goods and comes back for the money in two or three weeks. Nothing is added on top for those weeks by anybody. No charge for the time, no extra for a slow week. It is simply how the bazaar has always run itself.

Work out what that time is actually worth to you.

Say you take Rs 60,000 of goods on three weeks. For three weeks that Rs 60,000 of yours is free to be somewhere else: the electricity, a wedding order, the twelve things that turn over daily. If your own cash comes back slowly, that freedom is worth more than the Rs 250 a carton a depot would have saved you.

Now say your cash is fast, and money stands idle in the middle of the month. Then the credit is worth little to you and the direct rate is worth a great deal. Same two suppliers, opposite answer, because the shops are different.

One warning about credit in both directions. It is easy to owe four suppliers at once and to know the total for none of them. Wasoolo shows what is standing against each supplier before you take the next delivery, which is the number you want in front of you when somebody offers you a scheme. The habits that keep supplier credit from choking your cash matter more the cheaper your goods get.

Putting it back on the shelf by eight in the evening

Ten past eight on a Thursday. The last packet of the tea people ask for by name left Waseem's shop just after seven. Four more customers asked for it before he pulled the shutter. Two took another one. Two walked to the corner and bought their bread there as well.

That is the true cost of an empty hook, and it does not appear in any rate.

A distributor answers his phone. You say two cartons, he says eleven o'clock, and by eleven the shelf is full. A depot has a route day, or it has your own van, your own morning, your own fuel. If customers name the item at your counter, that speed is worth paying for.

So whatever you buy direct, keep a small standing line with the distributor for that same item too. Not the whole quantity, just enough to cover the gap between your own trips. A higher rate on ten cartons a year to never run empty is a good trade, and it keeps a man on your side who might otherwise stop calling.

When goods come short, or come broken

Everything is fine until the day it is not, and then this one decides everything.

A carton arrives with two crushed units inside. Or you count the load and there are eighteen where the bill says twenty. Or a lot turns out to be near the end of its date.

With a distributor this is a five-minute conversation on his next round. He wants your order in a fortnight, and the replacements come off his own van. With a depot you file a claim, keep the packaging, wait for somebody to come and look, and carry the loss on your own books until it is settled. Sometimes it is settled properly. It is always slower.

So attach a number to it. If one carton in fifty arrives damaged and the depot settles half, that loss belongs on the direct side of your sum, the way the van fuel does. In the example above, two crushed cartons cost more than the rate advantage on all twenty.

Fragile goods, glass, anything with a date on it, anything that travels on a bad road: those are where a distributor keeps earning his higher rate. Tins, packets and soap can take the knock.

Schemes, targets, and the trap inside a good one

Both sides run schemes. A company's is usually bigger, and usually tied to a quantity you must reach.

Buy twenty, get one free. Reach a hundred cartons in the season and a payment comes at the end. On paper it looks like the rate falling again, and sometimes it truly is.

The trap is a target that puts your money into goods you did not need, to earn a discount on goods you did. A hundred cartons when you would have sold sixty is no saving at all. You took forty cartons at full risk to be given a rate on the sixty you were buying anyway.

Six questions before you accept a target

• Would I buy this quantity at the plain rate, with no scheme attached?
• How many weeks of selling is it, counted at my own counter's speed?
• Is the free stock something customers already ask for by name?
• Will the goods finish before the bill for them falls due?
• If I miss the quantity by one carton, what is left of the offer?
• Is this spare money, or the money my moving goods are waiting for?

Test one before you agree. Write down what you would have bought without the scheme, then work out what the extra quantity costs: the cash, the shelf space, the goods that will not fit beside it, and the weeks it will stand there. Compare that against what the scheme actually pays. Do it on the back of a bill, in front of the man offering it. A distributor's smaller scheme often survives that test where the company's larger one does not, because it is small enough to walk away from.

A free carton is also not free money. It lowers your cost on that item, so you can hold your selling rate and earn more, or drop it and hold your customers. Decide which before the goods arrive. A shop that quietly starts selling cheaper has given the scheme away to the street. If you run one rate for the counter and another for bulk buyers, work out what a scheme does to both of them.

What each one becomes over ten years

This is the part nobody puts in a sum, and it may be the most valuable line in the whole comparison.

A distributor's man walks into forty shops a week. He knows what is selling three streets away before you do. He tells you a new packet size is moving, that an item has gone quiet everywhere, that a shop like yours started keeping something you never stocked. When your money is short he takes half and comes back. None of that is on the rate list, and you cannot buy it back once it is gone.

A company relationship grows differently. It gets better with your volume, and it gets better in writing. Buy steadily for two years and you become a name to them: a better rate, a bigger scheme, sometimes a display stand and their man's phone number. Nothing about it is warm. All of it is durable, because it is tied to numbers and not to a friendship.

What ruins shops is treating either one as a marriage. If you buy direct, do not humiliate the distributor when you still need him at eight in the evening. If you buy from him, do not promise him the whole shop forever, because one day you will move your fastest item and he should expect it. Being open with both is the same discipline that decides whether one supplier or several suits your shop.

Decide it item by item, not shop by shop

Here is the rule.

The same carton, bought two ways

Direct from the companyFrom the distributor

The rate on the listDirect from the companyLower, and it is the number you rememberFrom the distributorHigher, with several things already inside it

Smallest orderDirect from the companyA full lot, often weeks of your selling in one morningFrom the distributorOne carton, one dozen, whatever you ask for

When you payDirect from the companyBefore the goods leave the depot, in fullFrom the distributorOften two or three weeks later, once he knows you

Putting it back on the shelfDirect from the companyYou go, or you wait for the route dayFrom the distributorA phone call at nine, on the shelf by eleven

Broken and short deliveriesDirect from the companyYour claim, your paperwork, your waitingFrom the distributorReplaced on the next round, usually without argument

SchemesDirect from the companyBigger, and tied to a quantity you must reachFrom the distributorSmaller, and easy to walk away from

What it grows intoDirect from the companyBetter terms as your volume grows, in writingFrom the distributorA man who tells you what the bazaar is buying

Buy direct for the two or three items where you can absorb the smallest order without your shelf noticing, where the goods travel well, and where you have somewhere dry to keep a stack. Use the distributor for the long tail: the forty items that sell one or two a week, where a lot of twenty would sit for a year and where you would rather ring a phone than start a van.

Wasoolo will hold both suppliers against the same product, so the direct rate and the delivered rate sit side by side when you check. There are three tests for the day an item is ready to move across. Its smallest company lot must be under about six weeks of your selling. The saving on a full lot must be more than the trip and the breakage together, worked out on real numbers and not on a rate. And your galla must be able to pay for the lot without a bill of yours getting pushed to the following week.

When all three are true, move that one item and nothing else. Watch it through two full buying cycles. If nothing went short and no supplier had to wait, move a second across. If your money went tight even once, put it back and stop. Most shops end up with three items bought direct and everything else from the distributor. That is not a compromise. That is the right answer, reached properly.

Common questions

Is buying direct from the company always cheaper?

No. It is always cheaper on the rate, which is a different thing. Add the trip, the smallest order, the damage nobody takes back and the weeks your money stands inside the stack. For a slow item the direct side is often dearer once all four are counted.

The company will not deal with a shop my size. Is that a problem?

Not at all, and it is the ordinary case. Most small shops are served by distributors for everything, and they buy well. Ask once a year, keep your fastest one or two items in mind, and let volume answer the question when it is ready.

If I start buying one item direct, will my distributor stop supplying me?

Tell him yourself, before he hears it on his round. Name the one item and keep buying everything else from him properly. A man who loses one line out of fifty and keeps the shop stays. A man who hears it from somebody else does not.

A company offered me a big target with a payment at the end. Should I take it?

Price the extra quantity first: the cash, the space, and the weeks it stands there. If the extra is more than about six weeks of your selling, refuse it. A target that buries your money in goods you did not need has not made anything cheaper.

How do I compare two rates when one is delivered and one is not?

Bring both to the same point, which is your own shelf. Take the depot rate, add the trip divided by the units, add what usually arrives damaged. Then it is one number against one number, and the comparison is honest.

Should I keep a distributor at all once I buy an item direct?

Yes, for that same item as well as the rest. Keep a small order going so the shelf never runs empty between your own trips. A higher rate on a few cartons a year is cheap next to an empty hook on a busy evening.