When done well, the relationship your practice builds with a frame vendor can set your practice apart from others, as well as retailers; can enhance your reputation for excellent, classy, funky eyewear and can give your practice an edge in customer service.
Whether you are buying your first inventory or adding a new vendor to your existing product selection, consider these helpful tips for negotiating with frame vendors successfully.
TACKLE THE TERMS OF AGREEMENT
Every new account comes with a Terms of Agreement. It is important the practice owner understand both what the practice is obligated to do and what the vendor is promising to do. Equally important is understanding what the vendor is not promising to do. Ask questions, and do not be afraid to request changes where the terms do not agree with your practice policies or inclinations. Most terms of any agreement can be negotiated.
One example of a question to ask: “Do the Terms outline different rules for exclusive collections vs. regular inventory, in terms of returns, warranties, display space and minimum quantities?” If so, consider how these different terms synchronize with the practice’s policies.
Additionally, if your practice is part of a buying group, ask what the differences are vs. standard contract terms. For example, a buying group may have negotiated free shipping or an extended time period to return product that does not sell.
REVIEW KEY POLICIES
Items to scrutinize (this list is not exhaustive):
- Billing. Take a look at the frame company’s billing terms. For example, if the practice’s accounting cycle is 30 days, but billing terms require the practice to pay for the product 15 days after delivery, also known as net 15, the practice may incur finance or late fee charges, depending on when the invoice arrives. Consider negotiating, so that these coincide.
- Sales rep visits. How often will the vendor’s sales rep visit the practice? What is the vendor’s sales incentive policy for doctors, staff, etc.? At my practice, I use a vendor agreement that outlines how the practice prefers to receive the vendor’s services and interact with the sales rep. This helps to keep things running smoothly and free from misunderstandings. Several versions of vendor agreements exist on the internet. Revalidate the agreement each year, each time there is a change in personnel (either on the vendor side or practice side), or each time there is a change to the Terms of Agreement.
A caveat: The vendor agreement does not change the terms of the contract, so those items in the Terms of Agreement need to be negotiated to be in line with your expectations and practice policies.
Other key policies to review:
- Who is responsible for shipping charges?
- How are backorders handled?
- What is the return policy for product that fails to sell?
- What is the warranty for broken or damaged product? Must pieces be returned to the vendor?
- How does the vendor handle replacement for discontinued or no longer available product?
- Are cases included in the purchase price, or are cases sold separately?
- What is the minimum quantity for the initial order? What is the minimum quantity for a replenish order?
- Does a minimum percentage of the frame board or display space clause apply?
- Are there any restrictions or limitations on use of the product(s) logo or brand name?
- Does the vendor offer a co-operative advertising program? If so, how does the practice learn more about participating in it?
DO THE MATH
Understand how the dollars work and how the dollars impact your practice. To do so: Set a budget for frames planned for purchase based on review of sales patterns in the practice for the past three months, six months and a year. Do the same for quantity: How many frames the practice needs of this vendor’s TYPE of product, e.g., retail price point, has the practice sold in the past three months, six months and a year? This can be pulled from your point-of-sale system or practice management software. Then, calculate. Do these numbers agree with the terms of the vendor agreement’s minimum quantity, minimum board space, etc.? If not, negotiate to fit with your expectations and practice needs.
BEGIN DISCUSSIONS WITH YOUR VENDOR
Once you’ve identified a particular vendor with whom you’d like to do business, initiate the discussion. When encountering the vendor at a trade show: Walk right up and speak to them. Most vendors have sample contracts in the booth where you can review the terms of agreement. Many vendors (although not in all circumstances) will negotiate terms right then and there in the booth. Consider scheduling an appointment to visit with the representative at a specified time during exhibit hall hours, so that you are assured to receive their undivided attention.
Another option: Phone the manufacturer and ask the national office to put you in touch with the local sales rep. When the representative calls, be sure to give yourself enough time to prepare your frame board statistics, budget and practice particulars in advance of the appointment date. This initial call is also a good opportunity to ask whether a blank contract term sheet can be sent for review in advance of speaking with their sales representative. A good rule of thumb: Never negotiate on-the-fly; be prepared. In addition to the statistics and the contract points you wish to negotiate, I suggest speaking with others who have the product line in their office or who do business with this vendor. Get their feedback, especially on “What do you wish you would have asked before doing business with this vendor?”
VIEW THE SELECTION OF A FRAME VENDOR for your practice as an invitation to a long-term relationship. Go cautiously and make an informed decision to transact business.
In general, a good fit is a frame vendor that enhances or expands the choice of products for purchase at a price point that is perceived as appropriate to your patient base. To assess this, review what frame lines are available in your patients’ local shopping area. (Frame reps can also tell you who else in the area carries their product and how quickly it moves.) Note that patients’ perceptions of choice can be based on either availability of brands or retail price points represented. Therefore, you want to select your frame offerings — and your vendor — to be able to offer both.
Consider these points when making your vendor decision:
Can your prices be competitive? Review published wholesale price listings for comparison to vision insurance plans in which the practice participates to determine whether this vendor’s product will align with practice revenue goals.
Will this vendor partnership allow you to provide a product mix robust for the patient base?
Does the product from this vendor offer your patients a different choice in their eyewear purchase?
Does the vendor’s offerings fit the message of your practice? For example, if your advertising describes your product for sale as “unique,” “better” or “cheaper,” you want frames that fit these adjectives. Avoid mixing your messages.
How can this vendor’s product be promoted? For example, does the vendor have a social media campaign prepared that the practice can use to promote the new product offering on its Facebook page or Instagram site?
Is this vendor’s product in agreement with the spectacle lenses that your practice recommends to your patients? For example, it’s a mismatch for patients to spend $800 on lenses in a $99 budget frame that has no warranty or plain CR-39 non-AR lenses for designer collection frames.
Once the conversation begins, make open-ended requests, such as “How does your company reward loyal customers?” or “Walk me through a defective product return transaction.” When discussing the terms in the vendor’s pre-printed agreement, go through each point — where there is agreement and where there is not. In my experience, a majority of the standard agreement is fine, with about 10% or less that is at issue.
Be absolutely clear which items are “negotiable with minor edits,” for example, the mentioned net 15 payment terms, and which terms are “deal breakers.” If the vendor doesn’t seem very interested in you becoming a customer, walk-away. In my experience, you’ll regret any other decision.
SIGN THE DOCUMENT
When finalized, be sure you are comfortable with all the terms of the contract before you sign it. Once the signature is on the bottom line, the negotiations are over. Also remember policies can change, so review terms and prepare to renegotiate each year. That said, keep lines of communication open with your vendor throughout the year. For example, frame vendors understand some frames sell and others not may not “do well.” Should the future require a discontinuation of a certain product line, consider exchanging for a different product line offered by the same frame vendor, if allowed, rather than shutting down an otherwise happy business partnership. OM