Profits Hiding in Plain Sight – Vendor’s Charge Backs – VCBs

Where are your profits hiding this month? How about checking in the back room or basement? I have a feeling if you are dealing with sales and inventories, there may be some secret cash in the form of returned items (VCB’s) awaiting for just the right time to get around to boxing and shipping back to your vendor.

By Michael Jackson, NW MT BEAR Program Director

Vendor’s Charge Backs – VCBs
I moved to Kalispell in 1973 as manager of a local Main Street shoe store. On my first trip to the basement I discovered several months, and perhaps years, of merchandise that had been returned to the store yet never returned to the factory for reimbursement. After a week of shipping and communicating with suppliers, we recovered enough money to make the first several month’s rent payments on our new location. Goods that were not approved by the manufacturers were donated to local charity providing a hand up to some needy residents and a small tax deduction for the business.

In my experience, vendors that supply merchandise to you have the same Mission Statement that you have, "to the very best of your ability, Sell Merchandise That Does Not Come Back To People Who Do". These suppliers want to continue to serve you well and generally will go out of their way to replace or refund your cash for merchandise that is unsatisfactory to your consumers. So, check the stock rooms and your favorite holding place for your hidden cash, and don’t be shy about asking your Vendor for a little help covering the cost of making your customer happy.

What other forms of Hidden Cash are lurking within your operation?

When dealing with your same vendors, be positively aggressive in your negotiations with your purchases. Certainly ask for a better pricing, or perhaps a discount based on the quantity you order. Ask for some help with the shipping charges and know that ‘dating’ is a common delivery perk that is good for the manufacturer as well as your business. Let’s say, you are ordering a seasonal product and may not sell until fall. Often your supplier will allow you to take delivery in late summer and not charge you for the product until fall. By accepting the merchandise early, you get an opportunity to see your customer’s reaction to the product and the manufacturer moves inventory out of their warehouse and may be under less pressure to get the shipments completed. Win-Win.

Ask you dealer if they would share some of the cost of advertising their product, called Co-Op Advertising. Perhaps a sin of larger proportions, be sure you take advantage of Co-Op Advertising that has been offered but not used. Very often manufacturers have displays to offer and marketing props and signage. I once wrote a letter to Wrigley Gum, who at the time had commercials of people walking around with 4′ long boxes of Wrigley’s gum. I told them I was in shoe business but would be fun to display my products in the window with their oversized gum boxes. They couldn’t thank me enough, and sent me a half dozen boxes that I used for several seasons. Also, ask them if they have advertising materials or commercials cut that you might add your tag to the end – production costs of advertising takes away from money you could use to purchase time or space in your favorite media.

Finally, this may be somewhat unusual, but please put this idea in your ‘don’t be shy’ memory bank. If you purchase products that just do not sell for whatever reason, sometimes it doesn’t fit, but sometimes it just doesn’t work in your market. Ask if you might return the product. You will often be surprised. Sometimes it does sell well in another area and they can re-route the merchandise. Continue to remember, it is in their future interest to be a part of your success.

My favorite client ever in business was a gentleman now deceased, Gene Peet. Gene invented and manufactured the Peet Shoe Dryer that many of you use to dry your boots in your laundry room. He invented this in the 1950’s and continued to sell all across the United States in early 2000’s. He came up with yet a brand new variation of his product in 2000. He invented a propane version that sportsmen could take out in the woods and dry boots out in the field without electricity. He sold it nationwide and to the largest sporting goods dealers in the business. The product did not move off the shelves as everyone expected. Mr. Peet did not want to jeopardize his relationship with customers he sold to for 5 decades. So, he re-purchased every propane dryer that did not sell across the U.S. This act of kindness dealt a serious blow to his company for the next couple of years. Today —– his propane dryer is perhaps his best selling product and you will see them on the shelves of Cabela’s, Sportsman and Ski Haus, and Snappy’s, and more. His sporting goods customers have never forgotten that Mr. Peet had no obligation to almost break his own company to help out his retail clients.

Final, final note. Gene’s son continues to run the company in Gene’s tradition. They are truly the ‘preferred’ employer of St. Maries, Idaho, if not the state of Idaho. They supply baby sitters for their staff, they allow the employees to come up with their own work schedule and which jobs they do each day. He shares his profits with those employees at end of each year, providing he hasn’t given it back to their customers to maintain good will. 

Business doesn’t have to be magic, but does require an impeccable understanding of ‘The Golden Rule’.
Oh. If you would like to discuss your business and how you might be more effective. The Business Expansion And Retention, BEAR Partners have resources at your disposal, almost 100% free of charge. Contact us at [email protected]

Michael Jackson