What makes a retail business rise above the rest? A well-oiled operation that keeps shelves stocked, prices competitive and customers coming back time and time again. But behind the scenes, it comes down to one crucial piece of the puzzle: the procurement process.
Many might simplify procurement to just buying supplies, but it’s a far more strategic process, especially for multi-location retailers where it critically impacts profitability and success.
From building relationships with reliable suppliers to negotiating favorable terms, procurement is about finding quality at the best value. And when done right, it doesn’t just protect your bottom line—it drives growth. With a streamlined procurement process, retailers can enhance inventory tracking, optimize supply chains and boost profits across every location.
- What is procurement?
- Types of procurement in retail
- The procurement process in retail
- Advantages of effective procurement in retail
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What is procurement?
Procurement is how businesses source and acquire essential goods and services they need to function. In the world of retail, it’s the dynamic process of identifying the best suppliers, scoring the best terms and ensuring products arrive when customers need them.
Think of it this way: effective procurement ensures your inventory levels are perfectly balanced. It means your store is stocked with items that your customers actually want, eliminating empty spaces or excess stock tying up resources.
For retailers, procurement is more than just an administrative box to be checked; it’s a direct driver of profitability and customer satisfaction. Ultimately, it ensures that your customers find exactly what they’re looking for, fostering trust and loyalty that keeps them coming back. For retailers managing multiple locations, a seamless procurement strategy is the foundation upon which growth and success in a demanding market are built.
We spoke with David Palatnik, Founder and President of CBD Kratom, about how he’s able to manage over 60 locations and keep them all running like clockwork. His biggest piece of advice? Simplify your systems and make more informed decisions with reporting. Keep reading to hear how CBD Kratom keeps innovating across 62 stores with Lightspeed.
Types of procurement in retail
Procurement in retail isn’t one-size-fits-all, though. It breaks down into distinct categories, each serving a specific purpose to keep operations running, inventory stocked and costs in check.
| Procurement Type | Description | Examples | Key focus |
| Direct procurement | Securing goods directly tied to what the business sells. | Products for resale, raw materials, finished goods; grocery store buying produce, clothing store sourcing apparel. | Directly affects sales and customer satisfaction; timing and accuracy are crucial. |
| Indirect Procurement | Acquiring goods and services needed for business operations but not for resale. | Office supplies, marketing services, logistics, internet and POS systems like Lightspeed. | Keeps operations running smoothly; supports business functions but doesn’t generate direct revenue. |
| Goods vs. services Procurement | Distinguishing between physical items and intangible needs. | Goods: Inventory, equipment packaging materials.
Services: Cleaning services, IT support, consulting. |
Balancing both is essential for a strong retail strategy. |
| Strategic Procurement | Focusing on the “how” and “why” of purchasing, emphasizing long-term value and relationships. | Building sustainable supplier relationships, negotiating better terms, aligning with business goals. | Overarching strategy; elevates procurement beyond fulfilling immediate needs to creating a competitive advantage. |
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The procurement process in retail
Step 1: Needs identification
Everything starts with knowing exactly what your business needs. Retailers look at customer demand, stock levels and operational priorities to figure out what products or services to procure. Tools like market analysis and sales forecasting help you predict demand and guide well-informed purchasing choices.
Step 2: Supplier research and selection
Next, you should be focusing on the reliability and quality of your supplier. Retailers research potential vendors, evaluate their pricing and delivery timelines, and prioritize partners with proven track records. It’s also smart to diversify your sourcing. Relying on just one supplier can leave you vulnerable to delays or shortages, so spreading out risk keeps your supply chain stronger.
Read more on how to find the best manufacturer or supplier for your business.
Step 3: Purchase requisition
Once you know what you need and who you’ll source it from, the next step is internal approval. A purchase requisition lists what’s being requested and ensures it fits within your budget and stock plan. It’s a straightforward but essential step to make sure every purchase supports your bottom line.
Step 4: Order placement
After approvals, it’s time to place your order. A purchase order is sent to the supplier, confirming quantities, delivery dates and terms. Many businesses now use electronic systems, like Lightspeed’s Retail POS to simplify this—making it easier to track orders, avoid errors and keep everything moving efficiently.
Step 5: Receiving and inspection
Your order’s arrived, but the process isn’t over just yet. Receiving and inspection are crucial checkpoints that ensure everything’s right as rain.
Retailers carefully inspect deliveries to make sure everything matches the order. Quality, quantities and accuracy are checked, and any issues are addressed directly with the supplier. This step prevents problems like stockouts, excess inventory or disappointing customers with faulty products.
Step 6: Payment and recordkeeping
The procurement journey wraps up with payment and recordkeeping. This step is all about matching invoices with purchase orders, processing payments and keeping meticulous records for future reference. Using tools like Lightspeed Payments makes transactions quicker and more accurate, ensuring payments are processed smoothly without disrupting your workflow. Clear, organized records make everything easier; when your documentation is easy to follow, you’re in a stronger position to make smarter decisions that help your business grow.
Advantages of effective procurement in retail
| Advantage | Description |
| Cost saving | Effective procurement controls costs by securing bulk discounts, better payment terms, and reduced storage expenses. It also prevents costly mistakes like overstocking, freeing up cash flow for growth. |
| Inventory optimization | Just-in-time inventory ensures stock arrives when needed, cutting storage costs and boosting turnover rates. Aligning inventory with demand keeps your business efficient and responsive. |
| Improved supplier relationships | Strong supplier relationships mean consistency, faster problem-solving and better terms. Collaboration with trusted partners leads to creative solutions during disruptions and high-demand periods. |
| Operational efficiency | A streamlined procurement process eliminates delays and confusion, allowing your team to focus on growth-driving activities like boosting sales and enhancing customer service. |
| Risk mitigation | Diversifying suppliers and planning ahead minimizes risks from disruptions, ensuring business continuity when it matters most. |
Bottom line
Procurement is more than buying up the right products—it’s the backbone of running a successful retail operation. It’s where supplier relationships, inventory planning and cost control come together. When done right, it cuts unnecessary expenses, keeps stock levels accurate and ensures you’re always ready to provide the best customer experience you can.
Talk to an expert to see how leveraging the right tools for procurement can help your business thrive.
FAQs
What are the challenges of procurement in retail?
Procurement in retail comes with its fair share of challenges. Supply chain disruptions can throw off delivery schedules, while unpredictable demand makes it harder to keep shelves stocked without overordering. Relying on a single supplier adds risk—any delays or quality issues can leave you scrambling—yet juggling multiple suppliers often means more complexity. For retailers with multiple locations, staying on top of delivery timelines and maintaining product quality takes careful planning.
How is strategic procurement different from regular procurement?
Instead of just buying what you need, strategic procurement is about creating long-term value. It prioritizes building strong supplier relationships, negotiating better terms and ensuring procurement aligns with broader business goals. Regular procurement is more straightforward, focusing mainly on the immediate purchase of goods or services. Strategic procurement goes deeper—it improves reliability, streamlines operations and delivers consistency across all locations.
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