smallbusiness.co.uk: Helping your business think big

Getting your products into a supermarket can make you feel like an aspiring actress desperate for a first break after a string of rejections. ‘I’m gonna make you a star kid. You’ll be a household name,’ says the agent. ‘Just need you to do a couple of things for me first. Err, sign here.’

For suppliers ‘terms’ can include anything from having to hand over last minute price reductions for promotions, accepting retrospective contract changes, or being de-listed at no notice. Little wonder there’s been a fresh round of calls for a supermarket ombudsman to intervene in this notoriously unregulated industry. As ecommerce remains a thriving sector, businesses no longer have to accept supermarkets' bullyboy demands and can sell online instead.

The truth is that for some suppliers the only thing jumping into bed with the retail behemoths will leave them with are a pile of broken dreams.

But to cast supermarkets as the villains of SMEs is wrong. After all, the fact they control 80 per cent of the grocery market provides a great opportunity for small businesses with the right strategy looking to grow.

Duncan Swift, head of the food and agribusiness recovery group at Grant Thornton, has seen businesses fail after too quickly entering into relationships with supermarkets. Nevertheless, he believes that if approached correctly, SMEs can protect themselves and grow at the same time.

‘Businesses need to first understand their objectives. What do they want out of the supermarkets? If it’s an increase in turnover they need to see if the terms will help them achieve that. As Alan Sugar once said, anyone can sell £1 for 99p.’

Swift adds that if the terms don’t fit, then the business shouldn’t be afraid to say no. And if the business does accept the agreements, there are things it can do to safeguard cash flow.

‘Suppliers should maintain a record of all the trade terms, so if there are any disputes regarding supply commitments they will be in a position to quickly negotiate. Also, businesses shouldn’t be afraid to apply credit control. If they are suffering from late payments, then being assertive with the accounts department will have no bearing on their relationship with the buying department,’ adds Swift.

Play it the right way and you never know – your product really might be the next big thing.

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