Vendor Selection
The Ag Trading Post represents the finest lines of products from manufacturers both locally and across the globe. It is important for both customers and vendors to understand the metrics we use to evaluate product offerings for the store: geographical, qualitative, and financial.
Geographical: Ag aims to offer local producers an additional outlet for their creations. We work diligently to support local sourcing, but only if it satisfies our other metrics. For example, we offer Texas-grown organic cotton shirts at the Ag. However, there are no competitive textile mills in our local area, and as such, we must rely on mills in North Carolina to weave the organic cotton into fabric. If we do find a mill locally (there aren’t any, we searched), the cost for its service must be competitive with that of the remote mill. Second, Ag also aims to support USA-owned and operated manufacturing. Once again, if the US business is not competitive in either a cost or quality metric, we would not represent them simply because they satisfy our “Made in USA” metric. Ag is willing to pay more for quality, not manufacturing inefficiencies.
Another geographical component we consider is the contribution each product line has to our local barter economy. The Ag exists to create a solid foundation for the Dallas trade market, offering fellow merchants and businesses a place to go where they can spend accrued silver medallions, replacing cash COGS expenses. Ag offers many health and fitness related products because we have many fitness facilities, yoga studios, personal trainers, and health practitioners in our local barter network. They are able to trade for items that they in turn sell to their customers for “cash”. This allows merchants to accept payment in trade, as we create an outlet for them to spend their silver at the same value it is first accepted by them.
Qualitative: Ag offers the best in class for several reasons. First, selling cheap stuff is a surefire way to ruin relationships with customers. Second, there is no profit is selling junk, and the Ag Trading Post would not be able to survive without covering its operating expenses. For each product offered, Ag asks this question: will this product earn the confidence from our customer to warrant a referral? While we welcome new vendors to our system, we will not sacrifice or abandon the requirement of excellence for new items to fill up the shelves.
Financial: the final and often most confusing metric we use is based on costs, the currency used for sourcing, and retail price structure. Our limitation in this category is based on the fair market retail price (a price one would expect to pay at any other fine retailer) and the trade value of American Open Currency Standard barter medallions.
Products acquired in “cash”: Ultimately, we would like to make purchases from vendors in ounces of Silver. Unfortunately, not all vendors accept alternative currencies or payment in trade, and as such we evaluate the importance of stocking a product purchased in cash. If we determine the product is critical for the success of our operation, the next step is to ensure that the wholesale cash cost (including freight) is less than 50% of the fair retail price. This permits the Ag Trading Post to retail the product in Silver at trade value while still earning a small profit. To this end, we are constantly searching for overstock and inventory specials from “cash vendors” to bring back to our marketplace in silver at trade value.
Products acquired in “trade”: Trading some of our existing inventory is an exciting way for us to diversify offerings without investing additional capital. In this scenario, a monetary value must first be assigned to your trade. Then, depending on our level of excitement regarding your product, we will subtract anywhere from 0 to 50% of the value and apply the final credit towards merchandise in our existing lineup. The deduction affords us a retail markup.
Products acquired in Silver: This option is preferred, but offers the greatest challenge. The first roadblock is for our vendors to stop thinking of AOCS Silver in its relative value to the US dollar. Each one ounce medallion represents a trade value in the barter network of “fifty” units. Think of these units as you would think of the value of a product or service in dollars. For us, this means that the products we represent must be competitively priced in trade units, which happen to be similarly priced elsewhere in dollars. Therefore, if you retail your product online for $650, then we would sell it at the Ag Trading Post for 650 units, which in our language is 13 ounces of AOCS Approved .999 fine silver. Previously, our acquisition cost must be less than 13 ounces of AOCS Approved .999 fine silver for us to market the product at a profit.
What’s a vendor to do with 13 ounces of Silver? Well, what would they do with 13 pieces of Federal Reserve Note paper, each bearing the value of FIFTY DOLLARS? Obviously they would spend the money on raw materials, advertising expenses, printing, bookkeeping, payroll, and other administrative and leisure expenses. AOCS Silver is to be used the same way: there is an extensive network of merchants across the country, most of whom gladly accept the currency at its trade value.
For vendors that can’t or won’t think of AOCS Silver as a currency that can be used just like “cash”, we ask that you consider your production costs. In the above scenario, is the USD value of less than 13 ounces of .999 fine silver worth more or less than your production costs? If it is worth more, than selling your wares to us is like buying silver at a discount. Also, another alternative is to collect cash for your production costs that can’t be satisfied from material suppliers in Silver, and then accept Silver for your wholesale profit margin or labor.
Remember, the one constant is that products at the store must be sold at a fair price in Silver at trade value. Contact our team to figure out how we can best create value for each other by retailing your line at the Ag Trading Post.
Continue Reading: Growth Strategy
