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Marketing on Main Street
From the Corner Store to Nordstrom, Distributors Find Niches in the Retail Market
FORM Magazine
October 1991
BY KATHERINE LEUPOLDJim Conway has an enviable client: Nordstrom, the Seattle-based retailer. He sells the company several internal and external forms and handles its pick and pack. Conway's success with Nordstrom did not come easily. He called on the company at least five times, begging to help with any problems. Finally, the buyer called and asked Conway, principal of Farwest Paper Flow Inc. in Seattle, to redesign a tag system that was inadequate. Conway did, and the retailing giant has been buying from Farwest for seven years.
Conway's dealings with another large department store chain were not as enviable. The store was price conscious and the buyer often unclear about specifications and expectations. "No matter what we did, we couldn't win," says Dave Satterlee, CFC, principal. The firm gradually de-emphasized the account and no longer sells to the unprofitable client.
These two examples illustrate the diversity of the retail market. Distributors sell to everyone from huge, well-known retailers whose buying is controlled by purchasing agents to Mom and Pop retailers whose owners are the buyers. As in other industries, distributors cite a wide range of preferences among retail buyers, from the very price conscious to the delivery- and system-minded.
Often, retailers treat their vendors the same way they treat their customers. Service-minded Nordstrom is a prime example. "Nordstrom treats their vendors like no one else," says Conway. "They have high expectations of service. If you meet their needs, you will grow with them." Although distributors disagree about how important price is to retail clients, Marc Zacuto says discount retailers are more price conscious than others. But unlike the other vendors retailers buy from, distributors do not sell commodities that can be discounted easily, says Zacuto, a partner in United Forms West Inc. in Sylmar, Calif.
The Market
Distributors need only peruse a copy of the daily newspaper to learn how competitive the retailing market is. The business section carries news of mergers and bankruptcies, while the front section is filled with ads for daily sales. In the past several months, the situation has been exacerbated by the lackluster economy. For this reason, some of Fred Elhami's retail customers have been ordering in smaller quantities. Elhami, president and owner of AFE Industries Inc. in Santa Fe Springs, Calif., says his retail clients-large department stores -also have been paying slowly, in 45 days on 20 day terms. "But if you don't work with them now, they won't work with you later," he says. In the past year, Conway has noticed a significant increase in requests for bill as shipped services as retailers try to avoid tying up cash in forms. During slow times, many retail buyers also look to cut costs and inventory levels, even those usually interested in superior service and systems expertise, he says.The competitiveness of the retail market also works in distributors' favor. Jack Wright's retail clients look for design, service and price-in that order, he says, because retailing is a "fast-changing environment where techniques and procedures change to keep up with the competition." When retailers' sales drop drastically, they look to him for more efficient ways of doing business by employing better systems, says Wright, president of Atlas Business Forms Inc. in Overland Park, Kan. He also finds retail clients loyal because they are accustomed to working closely with a narrow base of vendors.
The market also is competitive for forms distributors and non-independents. The non-independents are lured to large retailers by large orders and frequent reorders, say distributors. Orders of 250,000, even 500,000, are common. Forms distributors able to satisfy delivery requirements benefit too. Turnaround is critical, says Joan Graham, president of Sunshine Printers in Kaneohe, Hawaii, since usage often is linked to sales and advertisements. Elhami says quality and image are important when the item, such as a tag, will be seen by customers.
Dealing with Retail Buyers
Distributors sell to a wide variety of buyers, depending on the product and retailer. At large stores, buying often is handled by purchasing agents, who, in Wright's case, are part of a centralized purchasing department. Conway says some retailers favor decentralized purchasing since many of their products, such as clothing, are bought regionally.Wright sells to controllers and MIS managers as well as purchasing agents, depending on the application. In many cases, purchasing agents at the large retailers reserve one day a week to see buyers, says Elhami. Buyers at large department stores may provide distributors with complete specifications, and some stores handle their own inventory control and distribution. In smaller operations, distributors often sell to store owners who know little about forms.
Products demanded by retailers are as diverse as the retailers. Graham sells flyers, forms and advertising and promotional materials to large and small retailers-everyone from small jewelry stores to the Sears Service Department, which handles purchasing for Sears stores in Hawaii. Like other large retailers, Sears produces many of its own forms and imports others from its central purchasing office, she says.
Elhami sells tags, labels, forms and even sew-in labels to retailers and their contractors. And, Zacuto's company has found its niche in selling stock and custom forms, including customized software-compatible forms, to equipment rental stores. The firm sells to about 200 clients in 50 states and offers forms for use with several software programs used by equipment rental firms.
Trends
Many large and small retailers have replaced custom credit card slips and sales slips with multipart add rolls that run through cash registers. "In today's market, the way the cash register is interfaced with computers is dropping the need for some forms," says Graham. Conway predicts the unit set sales slip will one day become obsolete.Retailers, especially large ones, have used bar codes for years on tags, labels, credit cards and courtesy cards, including check cashing cards used by grocers. Farwest sells "a ton of blank label stock" for on-demand bar coding, says Conway. Distributors also sell tags, forms and other products compatible with bar code printers and scanners. As bar code equipment prices fall, this technology is expected to trickle down to smaller retailers. For now, smaller retailers are not prepared for the cost of scanning, says Graham.
Distributors also are benefiting from frequent shopper club cards, an idea that airlines started with frequent flyer cards. Members in these clubs may receive a plastic or paper membership card, usually after paying a nominal fee. In some cases, the cards or labels on the cards are bar coded. Club members are entitled to discounts and special benefits. Retailing experts predict a boom in these programs, giving distributors an opportunity to sell cards, labels, direct mail pieces and related products.
In the Pacific Northwest, where interest in the environment is high, retailers are very interested in recycled paper, says Conway. Farwest has converted several forms to recycled paper for many of its retail clients, who want to show the public they are concerned about the environment.
Katherine Leupold is managing editor of FORM magazine.