Problem Solver: The advantages of 'central billing' for food suppliers
Q: I am starting to sell a food product into some shops. I have heard something about central billing and I am a bit confused as to whether I need to be applying for this or not.
A: Shops like Spar, Londis, SuperValu, Centra, etc, are referred to as 'symbol retailers'. In other words, someone local owns the shop and operates under a brand name and licence. That licence requires them to buy a significant amount of the goods from the group who control the name they trade under.
This does, however, mean that these symbol shops have discretion to buy products from local suppliers. From some of the retailers, this local sourcing discretion is approximately 5pc. In others, it is a little bit larger. This means you can go directly to any of these symbol shops as well as all of the specialist shops directly.
The difficulty comes further on when you expand your business and if, for example, you now have 25 shops from one symbol group, you could find owners saying you are not local as you move away from your original area and they could also be stating that they don't have room for you under their 5pc local sourcing. You would therefore be seeking an arrangement with the head office of that symbol group to have you product listed centrally.
You would have already given the local store operator a margin and there will be a separate margin required for the central billing. The big benefit to you is that you can now approach any of the shops within that group and say that you are centrally listed, which would make it more attractive to them to stock your product and also, as the term 'central billing' suggests, you can submit one invoice to the head office of the group and they will recover the money from all the individual branches. That is a huge benefit to you.
Very often you may not get central billing at the very early stages of your business and you first have to prove yourself by going out and selling individually to the branches so that you can demonstrate what the sales are. It is only at this point that you can engage in conversation with the central buyer.
I hope that helps and if you have any queries please email me directly.
Q: Why have some of the retailers started to form partnerships with known fashion designers or experts in the food area?
A: This is a more recent occurrence. The retailer Dunnes Stores is a good example of this. As well as having their own private label ranges, they seem to have identified that partnering with the likes of Paul Costello, Francis Brennan, etc, will stimulate customers to buy even more product from their shops. That allows the customer maximum choice under one roof, by being able to choose Dunne's own label product side by side with some designer or celebrity-inspired ranges.
They also have taken a similar approach to the food sector, where they have acquired the business of the meat expert Pat Whelan in order to boost their credibility in this area, and now in some of the branches you can purchase some of the James Whelan range of meats. They also have other collaborations in the food area with Sheridan's and the Alternative Bread Company.
Again, the strategy is similar to the non-food area where the customer has a choice to buy Dunnes' own label products, the producers' private label and some specialist brand products.
There are different reviews in the market place about this strategy but I would certainly say that it has brought a new dynamic into the space and, in the case of Dunnes, has energised their business with consumers.
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