Contracts and meeting supermarket demand
Understanding contracts when supplying a supermarket, how to fulfil your orders and meet demand.
Before signing a supplier contract with a supermarket, it's crucial for business owners to carefully consider several key factors. From pricing and shelf space to exclusivity and supply terms, understanding these aspects is essential for building a successful partnership. Further details on each of the factors are outlined below.
Price
Determine margins needed for viability and ensure the price aligns with this. Watch for clauses allowing re-negotiation of price, which could reduce profit margins later. Consider how supermarket promotions may impact prices, potentially affecting profit margins.
Shelf space
Map out the allocated shelf space, including the number of stores, product placement, and duration. Understand the distribution across stores to optimise visibility.
Exclusivity
Assess any demands for exclusive selling rights and ensure a realistic expiry date clause is included if signing an exclusive contract.
Supply
Understand the quantity and frequency of supply required. Accurate supply agreements facilitate production and delivery planning. Avoid overpromising to secure the contract, as this may harm your business reputation.
Payment terms
Clearly define payment terms to forecast cashflow accurately and ensure timely payments.
Consider seeking legal advice from a solicitor before finalising any supplier contract with a supermarket. See how to choose and work with a solicitor.
Fulfilling orders and selling in supermarkets
You will need to work out how you will deliver your food or drink products to the supermarket. Few supermarkets or retailers accept direct deliveries to a store, so you will have to supply your products to a central distribution centre. To reduce delivery costs you could look at sharing deliveries with another local supplier.
You should make the effort to promote your product in-store. For example, you could focus on selling points such as making your product as regionally identifiable as possible. This is something that customers are currently keenly aware of. Make sure your product is displayed properly and look at doing in-store tastings. It is only the start to having your product on the supermarket shelf - you must work to keep it there and hopefully sell more or other product ranges.
Relationships between the retailers and the companies who supply the products they sell can sometimes be complicated. You should try to establish good relationships from the outset when selling to new supermarkets.