Most beverage wholesalers are not charging service fees to retailers.
These wholesalers are missing their biggest opportunity to improve profits short of acquiring more territory or getting a major new brand. Most wholesalers can’t cut enough costs to equal the same profit contribution that a service fee can generate.
Just about every company, from Amazon to the person who mows your lawn, charges a fuel or service fee on every invoice. Most of the major beverage suppliers charge wholesalers fuel or service fees.
This past year, numerous wholesalers contacted us seeking information on how to best design and implement service fees. We reached out to our network of wholesalers from all parts of the USA to identify best practices and develop an implementation process.
HERE ARE 6 ESSENTIAL TIPS WE GLEANED FROM OUR WORK.
1 // Call it a service fee, not a delivery fee or a fuel fee.
If fuel prices decrease, you don’t want to have to reduce the fee.
2 // The service fees wholesalers charge range from $3 to $15.
We believe $3 is too low and $10 should be the minimum target.
3 // Contrary to past experiences, chains will pay the fee.
All their other vendors are charging them a service fee. The chains will give you instructions on how to charge the service fee on their invoice.
4 // Independents are already paying service fees to all their other vendors.
They will pay you a service fee.
5 // Some small retailers may adjust their order frequency to save on service fees.
6 // Make sure you contract all the on- and off-premise chains well in advance of the go-live date.
It will take chains longer to set up for the service fee charge.
The key is to clearly communicate the fee to retailers in advance of rolling out the fee.
Many wholesalers send a letter or trust their reps to deliver the notification to retailers. Both of these are good options, but account notification needs to be tracked and have management oversight.