Response to Patty’s Predicament

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Everyone amazed me again with the amount of responses that we had and the comments that were made. There are a couple of overriding themes that I just want to point out:

1. Over half of the people who responded started off by saying “we had a similar situation happen to us”. So Patty is not alone!
2. We asked 12 questions and there was an overwhelming response to statement #3 as to what should be done. This one stated that the vendor should offer a discount on the original order. Most people felt as if the vendor did something that was inappropriate and it should be corrected on the existing order. And by the way, the vendor had already rejected that concept.
3. The second most popular response was statement #1 which said that the vendor should offer off-price packages to all the existing accounts. Yes, they can be sold on a C.O.D. basis.
4. Coming in at 3rd place was option #5 which stated that the vendor should offer markdown money as they do for the big stores. However, the second and 3rd responses together equal the first response about the vendor offering a discount.

I have highlighted some of the responses for review. One last thought. The majority of the people who went through this before rarely continue to do business with the vendor. And as one store put it, when a vendor starts this discounting practice, it always seems to be the beginning of the end for the vendor.

A sampling of your responses:

• Offer the same deal on already-purchased goods, as the vendor did to the liquidation outfit, even if the liquidator took much more volume of goods. Yes, this will cost the vendor…but vendor owes that, and more, for past loyalty and past profits.
• I would also ask them to keep them informed of things like this in the future which would give them the opportunity to decide if they could handle that size numbers… Send merchandise back to manufacturer.
• Clear the vendor out of your store! We did this with our #1 supplier about 8 years ago. This company represented about 30% of our inventory.  They were purchased by a national retail chain, a major competitor of ours! I decided to do without. It was challenging, it forced us to examine our inventory. our reasons for choosing item x over y and which products we promoted to customers. I didn’t want to cut off my nose, but I had a feeling it might be a healthy change and it worked out that way. Eight years down the road we have a better product mix, the “big vendor” is a has-been, and customers never knew the difference. It isn’t a mistake that I chose 1 for each item. I believe that all of these ideas should be utilized.
• If vendors want to service the specialty sector, then they need to be accountable to us and offer these clearance discounts to worthy accounts. Not sell us out to discount stores who are putting the specialty sector out of business. I also want to say that my new mission is to make sure that my vendors are selling to the right people. The three major questions, among the many that I ask prior to purchasing are:
  • Can I place product on my ecommerce website? I have put a lot of money into a quality site and will only purchase from vendors who assist in this venture.
  • Do you sell to Amazon and do you police ebay for reselling at discounted rates? If they sell to Amazon I will not do business with them…(Melissa & Doug) Just as an fyi, this seems to be the new revelation…Cloud B announced last week that they will no longer be selling to Amazon. I rewarded their commitment by placing an unscheduled order.
  • Must offer co-op advertising
• She should get the same price as XYZ, or drop the account. Lots of suppliers want into our stores, make them work to keep her.
• I am having a similar issue: I have an exclusive brand, and my rep sold to my 2 closest competitors! I have always bought all seasons, more than the minimums, for the last 4 years. I have slowly developed a niche and have enough stock to successfully merchandise the product. The rep’s response is “sorry” and “they’ve raised the msrp, so you all should be able to sell it”. Yeah right…… both my competitors are bottom feeders: One sells at keystone (product is suppose to be 2.25 mark-up), and the other offers myriads of free product and service give-aways. I await with baited breath to see the response…..
• Present the Vendor with the facts about the loyalty of the Retail store. Ask the Vendor what they are going to do to keep the Retailer as a client. Then the ball is in the Vendors court ~ let them sweat about what its going to take to keep the Retailer happy. And the Retailer can always say “are you kidding me?” after the first offer.
• I disagree that a discount or anything you mention will change or do anything. Seems like crying over spilled milk. A retailer needs to add value to a product and make it something that a person wants to buy from them. If they cannot, than why sell it? Do that and deal with vendors that want to make you successful! Build your business rather constantly repairing it.
• If you look at history most companies who make it big in one market (such as specialty and then undercut to the mass are not around long) On season of discounting and no one really wants the line.
• Then if the relationship with the vendor is or can be mended, perhaps and only perhaps, she could consider ordering from them again. Tough to trust them again, though — well, other than to do the kind of thing that they did — thus the promise for the vendor to contact retailers about other locations where the merchandise might appear becomes important, I think and future benefits, as well. IT IS ALSO A TRUST ISSUE NOW. WILL THIS VENDOR DO THIS AGAIN.
• Never discount your goods to an outsider , someone who has never carried your goods, before they are offered to your best customers. We understand everybody can get in a situation where you have to raise cash fast. By offering it to your regular customers first with a letter of explanation you have an opportunity to both liquidate your excess inventory while maintaining or increasing your goodwill with the people that have supported you all the way.
• 1) Patty should ask the vendor to take back her inventory (and they should pay for the shipping and handling). 2) She should certainly not do business with them again (why give them a chance to screw her twice?). Find a better line elsewhere, guaranteed one exists.
  This happens all the time in our Industry. The power of the pen is the only way to combat this.
• I wouldn’t bother with the President, the damage is done. I would work from the bottom up. If the reps and sales managers keep getting ear fulls and smaller orders (these are the people most economically affected by smaller or no orders), they will be constantly feeding the higher ups the negative messages and they will eventually reach the top. Slow drips are more effective than a quick dousing.
• I don’t need COD discounted inventory. Why would I want all their horrid goods that didn’t sell anywhere else for less money? What guarantees do I have they will sell now at any price? Why would I want to turn our store(s) into a discount house – that devalues everything around their liabilities.
• What I would ultimately ask for is a swap, I mean afterall they have found the golden ticket with this discounter and they can apparently afford to sell them anything at any price – so they can have all of ours back and sell them to the jobber for whatever price they want. Apparently they value their business more than mine.
• Yes, it’s a tough economy but we don’t need our vendors making it any harder than it already is. I don’t know who the vendor is, but with practices like that, they are not likely to make it through this recession.
• Patty should not have all of her eggs in one basket or vendor.
  1. Discount the products at or below the local competition. Take the lost find another vendor.
  2. Ask the vendor for compensation on the next order. The compensation should be equal to difference in what she paid for the product and what the vendor sold to the competition.
  3. If the vendor does not want to work with Patty send all the merchandise back to the vendor.
  4. In business we need to work work with people we can trust to include customers, vendors, employees, lenders and advisors. If our instinct gives us that oh,oh feeling fire them and move on.
• I would want a discount on the original order and extented time to pay. I would never order goods from this company again. I am a small business and there are plenty of small manufacturers to order from. If a company sells seconds to the “down and dirty discounters” that’s another thing. Vendors have to make a decision are they marketing to the “boutiques” or the outlets, they can’t have it both ways, it is two totally different businesses.
• Rather than as a stop-gap ‘apology’, window & in-store signage and web content should be provided by the vendor to the retailer up front when the merchandise is ordered. When ‘times are hard’, then vendors should help retailers sell their product by offering resources that work. Perhaps that would have helped to prevent the ‘losses’ that necessitated selling to close-out discounters.
• Purchase all the stock from the discount store and stop buying from your normal vendor. Make sure you tell the vendor company’s president that this is what you are doing. Extract a promise for the future.
• My initial response to Patty is to cut your losses and run from this vendor. However, Patty has spent the time building and promoting the product line to her customers. Let the owner of the company know how you feel and what you’ve done for their product line and that you feel he has jepordized the integrity of the product line. Take any and all discounts and financial perks, run a promotion comparable to XYZ while offering exemplary customer service and product knowledge not available at XYZ. With the added discounts more people may be introduced to the line it may work in her favor in the long run. Put this vendor on probation and give him the chance to prove himself as an honorable person/company to do business with.
• The supplier has done something they felt best for their business. Now you must make the same type of decisions. The first thing is to assess how much damage this move has done to the image of the products in your area. If the outlet has a high visibility, then the line will be associated with “discount” in your customer’s mind for some time to come. Whatever the supplier might give you now – you will still be operating in a discount environment.
• I think your Good Business Doctrine is a Fairy Tale in my book of life. In my 15 years in business this has only become a concern in the last 5 years. I ask my reps to inform me if I’m purchasing anything that the discount chains are. Some reps will and some will not. Well — the will nots are not longer in my store!

What Could Your Best Vendor Do?

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WARNING! This Could Happen To You!

Ok, we all know that these are difficult times. They are definitely on the climb up. I am seeing more activity in stores than I have seen in a while. Don’t they know there is a recession going on?

BUT this isn’t about the recession or business conditions. It’s about something that can happen to you and it’s not that last computer scam. This is something that makes business conditions  even worse. It’s a situation that can simply turn your stomach into knots. WARNING! I am about to use a verb I have never used in any article, speech, or book I have written but frankly after trying to find a replacement for the next 30 minutes, I elected to go with it.

It is when a retailer gets screwed by one of their best vendors and the vendor does nothing to rectify the injustice. Here is the scenario: You buy a line when the vendor is either relatively new, the company has only been in business less than a few years or it is brand new to your area or region. Now you carry the line, season after season, and you grow with the line. Every season you buy a little bit more than the season before. The line becomes an important resource to your business. You never discount it, you never do anything that would hurt the integrity of the line.

You place your order for the season and as the merchandise is coming in, you are calling or sending cards to your best customers to let them know about the new arrivals. Then you overhear a couple of customers talking about the line. You hear one say to the other, “You can get this line at XYZ Bargain Warehouse Outlet Super Store for more than half off.” Your first reaction is “THAT’S IMPOSSIBLE. IT MUST BE A KNOCK OFF, A COPY!”  Or, “MANY LINES LOOK A LIKE.”

Then some of your best customers come in and tell you the same thing. Now you drive over to XYZ Bargain Warehouse Outlet Super Store and find that it IS being sold for less than you paid for it.

What do you do? You quickly write a letter to the President of the company looking for some help and guidance. Then you get a quick response from the president. It is very well written note explaining how the company had to make commitments a long time ago in order to get the shipments in from the Orient in time for the stores to have the merchandise. They explain that they never predicted that business conditions would deteriorate that quickly and the amount of stores that are having problems.

So for the sake of the health of their company they decided to liquidate their excess inventory. Then they proceed to explain that they sold all of this to one resource and they must have inadvertently sold it to a discounter in your area. But there really isn’t much they can do now and they took these steps to strengthen the line so that they could design and deliver the best possible products for all of their retailers in the future. Oh yes, then they always end these letters with something like this. Thank you for your understanding during these troubled  times in manufacturing and retailing worldwide.

Isn’t that nice. Sorry, the store just got screwed. (sorry again) BLAH BLAH BLAH. It’s a bunch of crap. First, they could have offered the off price merchandise in prepackaged groups at deep discount prices rather than selling it to the off price jobber who doesn’t give 2 hoots to whom they sell it. If you got the cash you got the goods. A vendor that offers these packages to their retailers can require that the packages CAN ONLY BE SOLD on a C.O.D. Basis. That’s fair.
By offering it to the stores first, you are helping your retailers in these troubled times plus it’s also a heads up or a defensible position when and if the goods show up in one of these down and dirty outlets. All we want is to eliminate the surprises.

However, doesn’t the store deserve something for the damage this vendor has created? The Good Business Doctrine indicates that some type of financial consideration would be appropriate, such as offering at least a 25% to 40% extra discount for the damage done. Or extending a significant discount on the store’s for next season’s orders. Maybe even a lucrative advertising allowance or supply direct advertising material in the forms of direct mail pieces, branded emails, window and in store signage. Even offering to supply an insertable page for the store’s website.  It would be nice to have another well written letter from the president to the store’s customers and include a discount coupon just for their brand. Lastly, at least extend the payment terms for the current goods, even if the vendor sells their receivables to a Factoring company.

Now the rest of the story,

This scenario is REAL. It is currently being played out by one of the BEST CHILDREN’S RETAILERS in America, Patty Bergstrom who owns the Velvet Goose in Gardner, Massachusetts. Gardner holds a very special place in my heart because it was one of the very first communities I ever worked in. It still amazes me the amount of the material I wrote for my work in Gardner that ended up in so many of my articles and books.
Patty is a member of The Retailers Advantage and asked for help with this situation. I will NOT mention the name of the vendor. (I am not looking for a needless law suit. But trust me attorneys are checking this piece as you are reading it.)

But this is what I want to do. I am going to ask all of you what Patty should do, what she should ask for, what the vendor should do or offer. So take this survey and we will be posting the results on The Retailers Advantage and will allow non-members to view the results. This is going to be fun. Can’t wait to read not only the responses but some of your ideas. I will promise you one thing. I will send all of the results to the president of vendor in question. Oh yea, I will also send him a free copy of my Vendor of Choice book and maybe even a couple of retailing books.

Take the survey here.

Where Are You Getting Your Advice?

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On Friday morning we had our first Teleconference of the expanded team from The Retailers Advantage. We are now up to 6 people working at The Retailers Advantage and soon to be 7. Anytime you hire new people, you spend some time training and sharing your philosophies, procedures, goals, and just the way we do things.

As I shared my mission about being a true advantage to retailers and how important it was to be able to offer the best and most accurate advice, the latest trends, strategies, and tools available. I then shared a story that I rarely tell. It was not a high point in my career but certainly helped shaped who I am today.

In the late 70’s, woman’s specialty store discounting became the concept of the day. The stores were 2000 to 4000 foot stores that were very visually appealing and didn’t look like the traditional bare bones, no frills, off-price store of the day. I had a salesman who was a partner in an off-price jobbing company and every time I would see him, he would brag at how well he was doing in the “Off-Price” business. He kept encouraging me to get involved because I knew what I was doing and the money was so much better than the traditional way that I was retailing.

He then shared with me some of the numbers that these stores were doing. He told me that the average 3000 square foot store did between $600,000 to $750,000 in ITS FIRST YEAR. Then in the second year, it did over a million dollars. Now at that time my store was doing a little less than $900,000. And the business was 35 years old. So after a couple of years of listening to these stories, I decided to jump into this concept.

I did everything top shelf; a great location, an excellent manager, wonderful employees, a well respected buying office, and my friend, the salesman, to advise me. Well, the store started off strong and was profitable from day one.  I took a salary right from the beginning and had no problems at all. Except for one minor point that drove me crazy.

The first year we only did $400,000. Instead of being happy that I launched a successful and very profitable business I was depressed that we didn’t come close to $600,000 to $750,000. Of course my advisor made me feel even worse and he kept on telling me I was the only one with such weak first year results. So instead of celebrating, I started changing everything. The layout, the merchandise, the advertising, the people and eventually even the location. Dumb, Dumb, Dumb! I literally killed a good business.

Please learn from me and be careful whose advice you are taking. Get different opinions, different perspectives, and then do what makes sense to you. The reason why I LOVE The Retailers Advantage is because I get to interview so many interesting people who bring so many different ways of approaching retailing. Within the next few weeks, we will be interviewing Elly Valas from Denver who is the co-author of Guerilla Retailing. Elle served as the major technical advisor for The Second Edition of the Retail Business Kit for Dummies. We disagreed in so many ways and I am referring to our session as the great debate.

While I am sharing mistakes I have made that we can all learn from, here is another. What good is having the greatest product in the world if you don’t tell anybody it’s there? At The Retailers Advantage we did a terrible job of letting people know what was new and different. Again Dumb. If you add things to your store, pick-up a new line, when you announce an event or sale in the store, or even when you hire someone new, let your customer know in a vehicle that will reach them. It will make all the difference.

Are You Proud of Your Business, Your Town, and Your Shopping Area?

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If not, why not?

I just spent 4 days in Downtown Detroit, Michigan. No, I wasn’t there for the Final Four (I left on Thursday when everyone was coming in). I was there to do a seminar and work with a group of selected merchants, one-on-one . My job was to give an honest objective point of view. Some people call what I do consulting but I look at it as more of an evaluation of a business and I try to point out what a business is doing right (We never seem to do that. We always seem to just focus on what we are doing wrong.) I also try to uncover the hidden assets a business has that they might not be aware of.  Sometimes it’s as basic as recognizing the enthusiastic and magnetic personality of an owner and to find ways to harness that power.

I just tell it like it is. Someone described me as the perfect knowledgeable stranger who tells us what we need to know. My recommendations are based on my personal experiences, my writings, and the hundreds of business evaluations I have done in every industry imaginable. Plus I am gone in a couple days so I rarely worry about the ramifications.

I was there to teach and help them recognize and communicate their talents and potential. Detroit, Michigan and many parts of Michigan have skipped right over Recession and clearly into a Depression.  Well, that’s what I was told and that went along with my preconceived impression.

Well, they might be in a Depression but you would never know it from talking to these merchants. WOW! They blew me away. Understand, many of these merchants were located around a 100-year old public market. Other businesses were located in the inner city. If when I said “Inner City” you got a visual of stores with metal security gates covering the fronts of their stores, you would be right.

So when you put the pieces together, inner city, metal grates, recession, and depression, you might get a visual of some pretty down or depressed merchants. On the contrary, it was anything but that. They were upbeat, positive, enthusiastic, and literally thrilled to be doing business in Detroit.

They loved the ethnic diversity of their community. They loved to help one another, promote one another, and they had a sense of pride of the community like I have never seen before. They all seemed to own the responsibility to  their community’s success. They loved to promote their neighbor’s business and always have nice words to say about them. It was truly an amazing experience for me.  I might have come to Detroit to inspire but I left inspired. There were businesses that I initially thought I would stay at for 45 or 50 minutes and I ended up staying for over 2 hours listening the customers rave about the business.

I have wondered why these merchants are so caring and helpful where in other communities they distrust and dislike each other. Maybe it’s the feeling of we have to do it together because no one else will.  Maybe it’s the community leaders that I worked with that symbolize caring and understanding. They celebrate these businesses’ successes and are so supportive during business and personal setbacks.

I felt a sense of community. A feeling of pride that was so special and unique,  like I haven’t seen in many communities. So what’s the lesson to be learned from all of this? I’m not sure but it’s sure nice to see merchants helping and promoting their fellow merchants. It’s a beautiful thing and I was just thrilled to be a part of it and can’t wait to go back to Detroit.  Maybe I finally understand that famous Motown lyric, “I’ve got sunshine on a cloudy day and when it’s cold outside, I have the month of May.” Maybe I just learned what a positive attitude and approach is all about. Thank you, Detroit.