MoneyStock
The supplier target scheme that buries your cash
Take forty cartons instead of twelve and four come free. Work out what the bonus pays against the money it locks up, and how to counter-offer politely.
Work out what the scheme pays you per rupee it locks up, and compare that with what the same money earns sitting free in your shop. Most target schemes are a real discount on goods you were never going to sell that fast. The bonus is genuine. The problem is everything you had to buy to reach it.
The offer that arrives with the order book
The supplier's man comes in with good news. Take forty cartons in the target period instead of your usual twelve, and you get four free, plus a better rate on the whole order.
It sounds like a straight gift, and part of it is. Four free cartons is four free cartons. That is why almost every shopkeeper says yes at least once.
Then the target period ends. The four free cartons are on the floor behind the counter because there is no shelf for them. Your money for the rent is inside those forty cartons instead of in the galla. And you are selling the same quantity per week you always sold, because a target changed what you bought and changed nothing about what your customers eat.
The scheme was not dishonest. It simply paid you in goods for a decision that costs you cash, and goods and cash are not the same thing to a shop that has to pay rent on a fixed date.
Here is the same decision seen from the other side of the counter. The supplier's man has his own target, and his is measured in what leaves the warehouse, not in what leaves your shelves. He is not tricking you. He is simply being paid for a different thing than you are, and once you see that clearly, his enthusiasm stops being evidence and becomes information about his month.
What the scheme actually pays you
Do the sum before you argue about whether it is a good deal, because the sum is short and it settles it.
Take the value of the free goods and the extra discount together. That is what the scheme pays. Then take the extra money you must put in, and the number of extra weeks that money is stuck in stock rather than moving. Now you can see the trade properly.
Say the target is 40 cartons instead of your usual 12
Made-up figures, chosen to show the shape. Put in your own margin and your own selling speed; a fast item can easily flip this the other way.
The point that changes people's minds is the time. Money in your shop does not earn its margin once. It earns it every time it turns over. A rupee that turns over three times in the target period at your ordinary margin can beat a bigger one-time bonus on a rupee that will sit still for two months.
So the honest question is never "is the bonus real". It is: does this bonus beat what the same money would have earned by moving? For fast items the answer is often yes. For slow items it is almost always no, and that is the whole answer to most schemes.
Three costs the scheme never mentions
The offer names its benefit precisely and leaves its costs for you to find out.
The first is locked cash. Money in cartons cannot pay a supplier, a wage or a rent, and a shop that is short of cash while being full of stock will end up buying its next fast-moving line on credit, which is exactly the trap described in buying stock on credit.
The second is space. Every carton you take beyond your normal turn takes room from something that sells faster. A shop has a fixed number of shelves and the target scheme is quietly asking you to give some of them to one supplier.
The third is the slow tail. Even a good scheme leaves you with the last few units of a large buy sitting for months. That tail is what turns into stock that never sells and eats your cash, and it is rarely counted against the bonus that created it.
What the offer says, and what it leaves out
What the offer names
- Free cartons, counted exactly
- A better rate on the whole order
- A one-line total saving
- A deadline that makes it feel urgent
What you find out later
- Cash locked for weeks while rent stays due
- Shelf space taken from faster-selling goods
- The slow tail of units left at the end
- The habit of buying to protect a target
There is a fourth, and it is about you rather than the goods. Once you have taken a target, you start buying to protect the target rather than to serve your customers, and that habit outlives any single scheme.
When a scheme is genuinely worth taking
Some are excellent, and they share the same shape. Learn the shape and you can answer in a minute.
The item must be one you already sell quickly and consistently, so the extra quantity is weeks of cover rather than months. If the extra buy is more than about six weeks of your normal selling for that item, the scheme has stopped being a discount and started being a loan you make to your supplier.
The benefit must come as a rate reduction or as more of the same item, not as different items you did not ask for. Free goods of something you do not sell are not free, they are a storage job you are being paid to do.
The money must be money you actually have. A scheme paid for with your rent money, or with credit taken elsewhere, has to earn much more than its bonus to be worth it, and it almost never does.
And your shelf must have space today, not in theory. If it goes on the floor, in a corner, or at home, add the damage and the forgetting to the cost before you decide.
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The mixed carton, and other quiet passengers
The most common way a scheme goes wrong is not the quantity. It is the mix.
The target is set on total value, so the supplier's man builds an order that reaches the number, and the fastest way to reach a number is to include the items nobody is asking him for. Two cartons of what you actually sell, one carton of a size or a variant that has never moved in your shop.
Read every line of the order before you agree, and strike out anything you did not choose. If the target cannot be reached without the passengers, that tells you the target is too big for your shop, which is useful information rather than a problem.
Watch also for the scheme that is really a rate change. A better rate for a big order is normal. A better rate that appears while the ordinary rate quietly rises is a different thing, and the only defence is knowing your own buying rates by heart, which is why working out your real profit has to start from the rate you actually paid rather than from the rate on the invoice you remember.
Negotiating it into something you want
You are allowed to change the offer. Suppliers' men have more room than they say, and a shopkeeper who counters politely is treated better than one who says yes or no.
Ask for the bonus as a rate cut instead of free goods. Money off every unit is worth more to you than extra units of the same thing, because it improves the item's margin without adding a single carton to your floor.
Ask for the same target spread over a longer period. If forty cartons in a month is too much, forty in two months is often accepted, and it turns a cash problem into a normal buying pattern.
Ask for staged delivery. Order the full quantity to qualify, take a quarter of it at a time, and pay as it arrives. Many suppliers will agree to hold stock, and this single change removes most of the space problem and half the cash problem.
Ask what happens if you miss. A scheme where falling short means losing everything is riskier than one that pays in steps, and knowing the answer before you commit is worth more than the extra carton.
Judge the scheme after it ends, not while it is running
The last habit is the one that makes you better at this every year, and almost nobody does it.
When the scheme is over, look at what it really did. What did you pay per unit including the free ones. How long did the last units take to sell. What was in the galla during the period and what was on the shelves.
Judge it after it ends, with these five answers
- What you really paid per unit, free ones included
- How many weeks the last units took to sell
- What was in the galla while the money was locked
- Whether anything in the order was not chosen by you
- Whether you would take the same offer again
Write the real per-unit rate into your records, not the list rate. This is the number that decides your selling price and your margin for months afterwards, and a shop that keeps its buy rate honestly is the only kind that can tell whether a scheme helped. In Wasoolo the buy rate lives with the item and the supplier's bills sit against his own account, so what a scheme did to your cash is visible rather than remembered.
A shopkeeper who has done this twice starts to notice something useful: the schemes worth taking are almost always on the items he would have bought anyway, in a quantity close to what he would have bought anyway. The bonus, in those cases, is a genuine reward for ordering in a slightly larger block. Every other scheme is asking him to change his shop for somebody else's month.
Then be honest about the pattern. If two schemes in a row left you with cartons at the back and a thin galla, the answer to the next one is a smaller counter-offer, no matter how good the free goods look on the day. And when you do say yes, say it for one reason you can state out loud, which is the same discipline as choosing between bulk buying and buying little and often.
The free goods are genuinely free. How can that be a loss?
The goods are free. The cash you had to put in to reach the target is not, and neither is the shelf they sit on. A gift that requires you to lock money for two months is a paid arrangement with a gift attached.
My supplier says the scheme is only for shops that take the full quantity.
Ask for a smaller version anyway, or for the same quantity over a longer period. If the answer is a firm no, decide it on the numbers alone and be willing to skip it. Schemes come round again.
Should I take a scheme on something new I have never sold?
No. A target quantity is the worst possible way to test a new item. Buy a small quantity at the ordinary rate, see whether it moves, and take the scheme next time if it does.
How much extra stock is too much?
A useful rule is that the extra buy should be no more than about six weeks of your normal selling for that item. Past that you are lending money to your supplier and being paid in cartons.
The scheme is on an item I sell every day. Is it automatically good?
It is a good candidate, not an automatic yes. Check the cash you must put in, the space, and whether the mix includes items you never ordered. Fast movers are where good schemes live, but the order can still be built wrong.
I already took one and the stock is sitting. What now?
Clear the tail rather than waiting for the perfect price. Turn the last units back into cash at a reduced rate, note what the scheme really cost you, and use that number when the next offer arrives.