Lets Make a Deal!
In today’s competitive climate, manufacturers may be more willing than ever to offer incentives to retailers.
By Mitch Rustad
Quantity discounts. Sell-in programs. Buy-in programs. Depending on whom you talk to, the actual terms may change, but virtually all specialty retailers — though some manufacturers refuse to or are hesitant to admit it — are regularly (and often aggressively) offered special incentives to increase a manufacturer’s overall brand presence in their stores.
But what, exactly, will encourage a wary retailer to add an extra dozen racquets to an order? And just how much product is a manufacturer willing to give away to secure precious shelf space in a leading specialty store? Most manufacturers, and many retailers, declined to discuss specifics of any deals that have been offered. The fact is, these deals have so many variables that manufacturers need to tailor them to specific retailers.
But in today’s ultra-competitive retail climate, the pressure is greater than ever on the sales reps to push bigger and bigger orders, while many specialty retailers — inclined to keep a close eye on their cash reserves — lean towards a steady stream of safer, smaller orders.
The resulting dance — or tug of war, in some cases — is greatly affected by a kaleidoscope of dealer incentives, which vary greatly in size and scope and transcend the boundaries of traditional volume discounts. This fancy footwork resounds from shop to shop and season to season, and while shops and manufacturers may not always move in sync, both ultimately move to the same tune. In the end, they each have the same goal: to get product into the customers’ hands. But in the short term, each has a definite agenda as well.
For now, industry leaders say the incentive scales are clearly tipped in the retailer’s favor. “It’s a buyer’s market,” says Sam Cook, general manager of Völkl Tennis USA. “There are simply too many racquets in the marketplace chasing too few racquet consumers. Since [the racquet brands] are all competing for a shrinking piece of the pie, it’s not surprising that incentive programs become more aggressive and buyers find themselves in a stronger position to dictate terms.”
That mood is echoed by retailers like Peg Cashman, co-owner of Advantage Yours in Clearwater, Fla., who says that bargaining with her sales reps for incentives beyond normal discounts is just a normal part of doing business, in both hard and soft goods.
“There are many, many things you can ask manufacturers for, so we negotiate with that in mind,” says Cashman, who isn’t shy to ask for additional discounts, free demos and string, and extras like point-of-purchase displays, often with successful results.
Often, retailers with proven track records can literally write their own ticket these days, though keeping manufacturing partners happy is just as important as ever.
“We have carved out some deals with manufacturers that I’m sure nobody else gets,” says Deana Mitchell, who with partner Scott Jones runs the highly successful Serious Tennis shops in Atlanta. “They try and go that extra mile with us, so we in turn have loyalty to them. It has to be a win-win situation.”
Ideally, manufacturer incentives should guarantee a satisfying payoff for both sides, the only wildcard being the consumer’s ultimate decision to buy.
For example, most string manufacturers have some form of a Frequent Stringers Program, which lets retailers exchange accumulated sales “points” for prizes such as ball hoppers, DVD players, or even a new stringing machine.
“It’s a bottom-line motivator,” says Chuck Vietmeier, product manager for Gamma Racquet Sports. “There’s another return for a retailer other than just the profit. They have an added incentive to push a certain brand of string, because there’s another goal to reach.”
Ultimately, however, the simplest incentives — such as a ‘buy nine of a certain product, get one free’ scenario — tend to also be the most popular with budget-conscious retailers.
“Everyone likes the free product, because it’s immediate gratification,” says Vietmeier. “They know what they’re getting right then and there, there’s no waiting for rebates. And in this retail climate, all we ever hear is, ‘They’re doing this, so what are you going to do for me?’”
There is a flip side here, of course. The tide can turn quickly if a manufacturer comes out with one very hot product, which leaves retailers salivating — and perhaps even willing to compromise — to get the product in the shop.
“Manufacturers keep introducing new products that you hope will take off, so you can build the whole brand around it,” says Vietmeier. “Certain incentive programs can ensure that gets done.”
For example, if a manufacturer has a very hot racquet that’s flying off the shelves, but wants to push a new line of string, a rep might insist that a racquet order also include a requisite amount of the new string, even if it’s free.
“It’s like leveraging one product for another,” says Vietmeier. “The retailers don’t really want the string, but they will take it because they’re making pure profit on it, so they’re gonna push it and it may eventually catch on. Ultimately, the racquets get on the wall and they get the chance to grow their string business. It’s like a win-win.”
However, such strategies or incentives won’t always guarantee that a retailer will stock a less-desirable brand or product line.
“I judge the products on how they are and whether they will sell or not,” says Chris Gaudreau, owner of Racquet Koop in New Haven, Conn. “I don’t care how much they offer me. If I don’t think it will sell, I won’t bring it in my shop.” But not all of the incentives out there are product-driven. Some manufacturers will offer employee incentives virtually guaranteed to entice them into pitching their products on the sales floor.
For example, one manufacturer offers shop salespeople a scratch-card program, which lets employees draw pseudo instant-cash lottery tickets (worth $5 to $15 each) from a hat with each sale. Another sales incentive program that was held nationwide upped the ante even further: the winner earned a year’s lease on a brand-new BMW.
“With this kind of incentive, why would that employee try to sell a different brand?” says Mitchell, who makes sure her sales staff knows where their bread is buttered when it comes to pushing product on the floor.
“You have to back it up with your own salesmanship,” says Mitchell. “But our recommendation holds a lot of weight with customers, so it’s really in the retailer’s hands what the consumer is going to buy.”
To be sure, this only scratches the surface of a very complex — and touchy — subject in the tennis industry. Understandably, some manufacturers were wary to even discuss specific incentive programs. But no matter how juicy the deals get, retailers would be wise to keep a close eye on their bottom line.
“I’m just hopeful that the better specialty stores recognize that incentive programs are only as good as their ability to sell in a timely fashion,” says Cook. “Too often, because of a particular incentive, they buy more than they need, and at the end of the day, they’re choking on the product just to get the carrot. We need to caution dealers to make sure the programs are in line with their bottom-line needs. Otherwise, the incentive is eroded.”
You only need to ask
More than ever, retailers are being offered incentive programs specifically suited to their store or because of a solid relationship with their local reps. Such instances can allow retailers free reign to barter, above and beyond the norm, for things such as credit for unsold merchandise, extra demos, free string or more POP displays.
“You have nothing to lose,” says Peg Cashman, co-owner of Advantage Yours in Clearwater, Fla. “I’ve found that like 90 percent of our manufacturers aggressively want to please. They will bend over backwards as much as they can to help you when you ask for things. Of course, they can always say no, but you can ask.”
In the current buyer’s market, looking for a carrot (or two) from a manufacturer is the norm for many retailers.
“They’re more willing to make deals and be creative than ever before,” says Deana Mitchell of Serious Tennis in Atlanta. “I think the companies are willing to give when they’re asked, but I don’t know if a lot of companies are really challenged by the retailers. If you don’t ask for it, you’re not going to get it.”
Cashman encourages retailers to ask their local reps for any kind of help — extra demos, rebates or credit on unsold merchandise, free string with racquet orders, buy so many and get one free, etc. — as long as their common sense is along for the ride. “You can’t be stupid and ask for four free racquets if you buy four,” says Cashman. “But if I buy 30 racquets, it’s only fair to ask, ‘What can you do for me?’”
To that point, Cashman suggests asking for incentives that can ultimately help both of you. For example, having extra demos in the store helps both parties. “If your lone demo is out and someone comes in and wants to test that frame, then you’ve potentially lost a sale,” says Cashman. But in the end, deal making should reflect and respect the ultimate partnership between manufacturer and retailer. “You’ve got to show them that you’re going to do your part, too,” says Cashman.
See all articles by Mitch Rustad
About the Author
Mitch Rustad has been a long-time freelance writer based in New York City.