Retail Contracting Guide

Amber Colley, Business Credit Specialist and Vice President Sales at Dun & Bradstreet, wrote for Entrepreneur online about suppliers’ big-box dreams and how to achieve them, and there is plenty of opportunity, both large and small in the retail space for suppliers. Retail supplier contracts can help increase brand awareness for your business as well as help you sell more product. With most retail supplier contracts, you may be subject to strict terms, but these contracts also tend to generate consistent product orders and greater brand recognition. Below you’ll learn how to get started, where to find supplier programs, what to watch out for, and more.

What is a Retail Supplier Contract?

Retail contracts, or vendor contracts, are generally used when goods or services are being provided on an ongoing basis, as opposed to a one-time order. With retail supplier contracts, your business will likely agree to provide a certain amount of product to be delivered on a schedule, depending on how well the product sells in the store. You make money by selling to the retailer, and the retailer makes money by selling to the consumer. Numerous supplier programs exist to help you get your first contract and companies often set aside a certain number of these contracts for businesses with diversity certifications.

Getting Started as Retail Supplier

So you want to become a retail supplier. The first thing you’ll want to do is your research. And there’s a lot of it. But, many suppliers get turned down for contacts (and loans) because they simply aren’t prepared. So, the research should be worth it. Here’s how you can start preparing for your first retail supplier contract:

1. Research the companies you’re looking to contract with

Knowing your strengths as a business is key, but in the case of supplying to retailers, it can be even more important to know how your strengths as a business can specifically help the company or companies you are targeting. If you don’t do your research on the company, how can you know if you’re even a good fit? It takes a lot of time and resources to go after contracts with a retailer, especially a big-box one, and you’ll want to make sure you’re making a wise investment for your company by going after retailers that will be interested by and excited to sell your product. After researching the business and their needs, you should have a clear picture of how your product fits on the shelves and why your business, specifically, would be the best choice to supply it to the stores.

2. Know Your OWN Business

Of course, you can’t just do research on other companies, you also should take a hard look at your own company. Determine things like price minimums, wholesale prices, suggested retail prices, shipping costs, packaging specs, payment terms, how you handle returns, and other details like these, even before you seek out a contract. When you begin negotiating, you’ll need to have these numbers in mind and be able to back them up, especially if you’re contracting with a retail giant.

For example, in the retail world – generally speaking – your wholesale price will be double what your cost is and your retail price would be double what your wholesale is. So, if your cost is $10, your wholesale price would be $20 and your retail price would be $40. Payment terms for these sorts of contracts are typically 30 days by check, but some companies offer discounts to those that pay with credit cards. You’ll need to know if you’ll be willing to offer these sorts of discounts, and what payment terms you’ll be comfortable with.

3. Take Advantage of Certifications

Is your business woman-owned, minority-owned, or veteran-owned? If it is, there may be contracts out there that have been set aside specifically for companies like yours. Many retailers, particularly big-box chains, set aside contracts for business with minority certifications. Having your certification doesn’t guarantee you a contract, but it can certainly help. Retailers like Walmart, Kroger, and Macy’s are just a few that are looking specifically for certified suppliers. One approach is to consider getting certified by the following organizations, and then seek out companies that set aside contracts for businesses like yours.

You can visit our diversity certification guide to learn more.

So you want to become a retail supplier? Follow these three steps.     Tweet This

Negotiating a Contract

What to Watch Out For

When you’re signing a retail supplier contract, you’ll want to pay attention to the terms of sale. A “true sale” means that the retailer is purchasing the product from you and is obligated to pay you whether it sells the product or not. This minimizes your risk as the supplier and guarantees you revenue.
Some retailers will write in terms that say the retailer gets a discount for paying early. For instance, if the retailer pays 30 days early, which might benefit your business, they receive a 2% discount. This may seem like a fair trade, but if they consistently pay early, you could miss out on 24% of your payments in just one year. Review the discount policy and negotiate if need be.
Shipping terms determine when you can officially invoice your customer and when the goods become the property (and responsibility) of your customer.
If you need to change your preferred payment at any time during the contract period (i.e. change of bank, change of payment method), it can take a considerable amount of time before the change is reflected with the retailer. It can be beneficial to decide in advance if you’ll be using a factoring service or asset-based lender, so you can set up the correct payment information when you are negotiating the contract.

Address These Top Issues

The retailer you’re contracting with may offer to pay for advertising, but you should check the rate before you agree. Retailers are offered some of the lowest advertising rates, but may up your rate in your contract. If you think that may be happening to you, consider placing the advertising responsibility on yourself.
You can encourage the retailer not to reduce the price of your item in store. If they insist on lowering the price, then make sure it’s coming from their margins and not yours. If you’re unsure whether or not the retailer is lowering the price, asking for a lower cost price in your contract can often be an indication.
For the sake of your brand, you’ll want to make sure you review all the retailer’s marketing material for your products. This way, you can make sure your product and business are being presented the way you intended.

Tips on Selling to Big-Box Retailers

1. Dot Your I’s and Cross Your T’s

Big-Box retailers don’t have time for brand new businesses who aren’t ready to go. If you’re trying to supply to Walmart, for example, you’ll need product liability insurance and proper universal product codes for all of your products.

Giant chain retailers also don’t like to be the biggest factor in a smaller company’s success. The retailer knows that if it pulls or change its order, it may ruin the small business. Having experience and several other supplier contracts can help you land a big-box store.

2. Be a Unicorn

Big retailers are looking for unique products, and a diverse product line. It’s easier for them to buy multiple products from one supplier than it is to go out and find many different suppliers and manage all those relationships. If you sell a unique product and have more than one thing to offer, you may stand a better chance.

3. Know What the Extra Mile Looks Like and Be Willing to Go It

You may have to adjust your pricing, upgrade your packaging or jump through other hoops in order to make it into a big-box store. Make sure your business is able to handle anything that might be thrown at it during the contract with a larger retailer or stick with smaller chains until your company is ready.

Insights from Retail Supplier Programs

Every supplier program is different, and yet, many of them have overlapping requirements. Especially if the company is a large retailer, it can look for a few things in particular. Below are some of the top requirements that retailers can look for in their suppliers, as well as specifics from Walmart.

Most supplier programs will require that your company have a D&B D-U-N-S® Number, the proper certifications, and a familiarization with the retailer’s products and services. Some will require certain business credit scores and ratings, and others may unique requirements. You can use the links below to become more familiar with some of these top requirements.

Get a free D&B D-U-N-S® Number

What is Business Credit?

The Supplier Evaluation Risk Rating from Dun & Bradstreet

Companies with Supplier Diversity Programs

Walmart

If you just want to supply to your local Walmart stores, first contact the store manager of the Walmart location you wish to supply to so he/she can evaluate your product. If the manager thinks your product is a good fit for the store, he/she will submit your product information to his/her supervisors. If the Market Manager and Regional General Manager also think your product would be a good fit, they will supply you with their information and the store numbers of the locations they wish to have your product placed. You will enter this information into the online submission form outline below for national suppliers. You will need to go through the steps online if you are invited to take the supplier questionnaire.

Consult Walmart’s local supplier’s checklist.

To supply to Walmart’s stores nation wide, you’ll need to submit your product online, fill out a supplier questionnaire and a supplier agreement. Completing the application process does not guarantee that you will be approved to be a supplier. You need to supply:

1. Company Information

2. GTIN/UPC Membership Number

3. Product Information

4. A Picture of Your Product (size 512 KB or less)

Important Tips from Walmart:

  • Your company name must match the Federal Taxpayer Identification number (TIN) assigned to your company and be identical in every company name field within all documents.
  • Do not use commas, periods or special characters in any field on documents.
  • Company Contacts fields must be completed.
  • If your Online Product Submission is approved, you will receive an email with a link to continue to Step 2 to complete the Supplier Questionnaire.

If you are selected to complete the supplier questionnaire, Walmart requires more information about your business, including:

  1. Federal Taxpayer Identification Number (TIN)
  2. GTIN/UPC Membership Number
  3. Dun & Bradstreet Number
  4. Company Information
  5. Ethnic Origin
  6. Company Contacts
  7. Company Manufacturing
  8. Company Accounts
  9. Company Promotions
  10. Company References
  11. Company Sales

You’ll need to pay the registration fees, which are outlined below:

  • U.S.-based suppliers: $125
  • Canada-based suppliers: $150
  • Non-North American-based suppliers: $275

For customers outside the U.S. that wish to supply non-food items to Walmart, you can contact Walmart Global Sourcing at gsnwpodt@wal-mart.com, and someone will direct you on next steps.
The supplier qualification process for Walmart.com consists of three steps:

  1. Registration: Gain access to the supplier on-boarding application
  2. Certification: Provide required information and documents about your company
  3. Acceptance: Accept Walmart.com Supplier Agreement terms

Walmart.com suppliers sell to customers in one of two ways (or both):

  1. Ship to Warehouse: The supplier will ship products to a Walmart warehouse, and Walmart will ship to the customers
  2. Ship to Customer: The supplier will ship the products directly to the customer

Use this supplier checklist to help ensure you have all required information before you begin the certification process.

Learn more about the process from Walmart.

Macy’s

Macy’s offers retail supplier opportunities in almost every department of it’s store. The company does, however, require suppliers to be certified by the WBENC or NMSDC. U.S.-based minority- or women-owned companies interested in supplying retail products for Macy’s stores can contact Macy’s Retail Supplier Diversity Program by completing this form.

As a potential vendor to Macy’s, you should be prepared to discuss the following:

Target Customer: Age, average income, median family size, geographic location, population size and expected growth.

Product Demand: Where you see it coming from in the future.

Benefits for Macy’s:

  • How your product will help position Macy’s to take advantage of future demand.
  • How Macy’s can gain market share with your product, control costs and/or maximize sales. The added value your product has over your competition.
  • How your packaging enhances the image and appearance of the product compared to the products currently carried by Macy’s, Inc.
  • How your product will positively impact related products in our stores.

Competition: Your direct and indirect competition in the market.

As a retail company, opportunities to place merchandise in Macy’s stores can be found in just about every department, specifically:

  • Women’s: Moderate Sportswear, Outerwear, Active, Swim, Junior’s, Accessories, Sleep Wear, Day Wear, Intimate, Casual, Career and Dresses.
  • Men’s: Neckwear, Knit & Woven Sportswear, Young Men’s, Outerwear, Furnishings, Contemporary, Accessories and Suits.
  • Children’s: All areas.
  • Accessories: All areas.
  • Cosmetics: Fragrance, Bath & Body, Color & Treatment lines.
  • Home: Decorative Home, Textiles, Small Electrics and Housewares. Furniture opportunities are very limited.

Learn more about supplying to Macy’s.

Kroger

In order to register as a supplier with Kroger, you’ll need the following:

  1. Basic Company and Contact Information
  2. Federal Tax ID Number, EIN or last 4 digits of SSN
  3. D&B D-U-N-S® Number

Kroger’s supplier application has three parts/requirements:

  • You must be certified by a third party agency (see more below)
  • You must complete registration in the Supplier Management System
  • You must meet Kroger’s selection criteria and requirements

Kroger recommends specific third-party certifications:

  • For minority-owned businesses, get certified with the NMSDC.
  • For women-owned businesses, get certified through the WBENC.
  • For gay, lesbian, bisexual or transsexual-owned businesses, get certified with the National Gay and Lesbian Chamber of Commerce.
  • For veteran-owned businesses, get certified with the U.S. Department of Veteran Affairs.
  • Kroger will also accept certification from any national, state, or local third party certifying agency.

Learn more about supplying to Kroger.

Photo CreditdandottavianoTwenty20