Did I Just Tell a Big Box Retailer No?
Sounds a little unbelievable, but yeah- I did. I won’t name names, but I can tell you that this big box retailer has everything for ‘US Moms. It all started exactly a year ago at a tradeshow in Vegas. Their buyer walked by my booth, smiled, and took off in a flash. I was writing an order with another buyer when it happened and too slow to respond. Should I chase after her, or just finish writing the order for the buyer who had been there first? I went with the latter and then spent the next hour searching the endless aisles for a glimpse of her. No luck. I finally gave up, and clutched to my story of the “big one that got away.”
Fast forward six months and it was Round 2. This time it was a different buyer, but the same company. She had originally stopped at a neighbor’s booth, but immediately came over to get information from me and chat. She was playing hard to get, but I could tell she was interested by all her endless questions. We exchanged information and were talking frequently after the show. I helped her pick the bestsellers for her order and she sent me a manual the size of a phonebook detailing all the compliance they would require from me. With the initial “order” finalized, she sent me one last piece of paperwork to sign. The “drop ship agreement” and oh, by the way, they would need a discount since they were dealing with me directly and not going through a sales representative. Whoa, wait a minute-what? Drop Ship? Discount? And with that, the dream shattered.
I spent the next week trying to convince myself that this was a good deal, and that the added exposure would help solidify the brand, blah…blah…blah. As many times as I tried to crunch the numbers, it just didn’t look good for me. Their requirement for inventory on hand and the added uncertainty of order volume would be a cash flow nightmare. Not to mention the strain on operations that could potentially sabotage my other “high volume, cash up front” customer relationships. Also, I had always focused on my relationships with specialty boutiques. I worried that this big box retailer might undercut my suggested retail prices and cause trouble for them - and myself included. Was the potential payoff worth the risks? In the end, I didn’t think so. I learned a long time ago that if you have to talk yourself into a decision, then it’s probably the wrong decision. The only time things have blown up for me with the business has been when I didn’t trust my instincts. I didn’t want to make that mistake again.
The following Monday I sent a very apologetic and sincere note to the buyer explaining that I couldn’t go forward with selling to their store. I kept it short and sweet and did my best, “it’s not you, it’s me” break-up to date. It may seem like a sad ending, but I promise its not. Ends up another big box retailer had their eye on the line and my heart was a flutter all over again. Once again, no names, but they are known for targeting designers to keep their store offerings unique, with a boutique-like feel. A better fit for my line already and no drop-ship, no discount. What was their only request? “Can we get some samples for a photo shoot? We want to use your clothes for an upcoming ad campaign…” I can handle those kinds of requests!
Moral of the story? As scary as it may be, sometimes saying “no” is the best thing you can do for your business. This can include turning down sales, firing unprofitable customers, and saying “no” to the industry status quo. You are the only one who will ever truly have your company’s best interests in mind, this is your greatest responsibility. Empower yourself to live up to that responsiblity.
Anybody else have a similiar tale? Let me know what yout think! As always, please comment below or email me at heather@glamajama.com.
August 13th, 2008 at 10:23 pm
Good for you. You dodged a bullet on this one. You most definitely didn’t make a huge mistake. Smooth move chica!
Vendor compliance is a whole other animal and frankly, in most cases if big box retailers are interested in carrying your line, it’s time to sell your brand and start another. I’m just being honest. Either that or it’s to ratchet things up and move up to a whole other level; can the line draw it?
What you didn’t discuss with the buyer altho you probably thought you did, was payment terms. I don’t care what they said, they’re not going to pay for 6-9 months and that’s assuming you haven’t been assessed any chargebacks and in fact, owe them money rather than vice versa. The person who approached you cannot make binding agreements with you in this matter. Or about anything really. Big box buyers are really more like agents who put interested parties together but it’s up to the two to negotiate the deal. And there won’t be much negotiating either unless your line is really hot and they MUST have it. You think I’m kidding? And also they want to return any of your product that hasn’t sold at the end of the selling season and charge you for processing and shipping it, -or even for destroying it- meaning you’re paying them to take your products on consignment and just hope you get paid. There are very many reasons why independent designers don’t sell to department stores.
To handle this kind of customer, you need to be factored which in the apparel industry means 20% of your invoices -period. That means you’ll have to produce offshore to make your margins. What’s worse, factors contract with you to buy ALL of your receivables meaning they get your steady 30-day pays and your house COD/PAD customers that you don’t need factored. That’s how the factor makes money. It’s crazy.
Maybe I know too much but there isn’t enough money to convince me to take on this kind of client -altho, it would be really good for you to adopt some standardized compliance measures they require that are “standard” (yeah, whatever *that* means) in the industry. Really, it’s a matter of adopting standard or best practices typical of quality firms. If any of this interests you, there’s a lot more on my blog.
August 14th, 2008 at 11:50 am
Hi Kathleen,
I hear ya! Over the past couple of years, I’ve worked with a couple of large buyers including Nordstrom’s, Barney’s, and a large national casino retail group. I think that experience helped prime me for all the little “gotchas”. I’ve learned to read the fine print! Also, I been pleasantly surprised to find a lot of their “policies” can be negotiated. The order process takes a little longer, but it’s worth the effort. As far as the payment for this one went, they used a third party to deposit the money into my account established at the third party. The only problem with that was the $695 set-up fee to get established with the other company.
Re: Factoring…Factoring is definitely tricky and I’m finding that your experience (good or bad) really depends on who you work with. To a certain extent it’s a necessary evil if you don’t have the money on hand to front a full production run.
Thanks for the tips and I’m familiar with your blog and book-they’ve been a big help over the years!
August 14th, 2008 at 12:39 pm
heather,
it’s time for a podcast! let’s do one about this experience and what’s happening in your business more broadly! You in?
Rich
August 14th, 2008 at 1:48 pm
Hey Rich,
Sure thing! Just email me and let me know when…talk soon!
Heather
August 20th, 2008 at 2:56 pm
hi Heather -
I happened to read your post today regarding telling a big retailer “no.” I have been working with qvc for over a year and a couple of larger mail order catalogs but i was recently approached by a larger retail chain ( semi large- 400 stores.) I have not been able to sleep for days as i continually run numbers to see if i can meet their price requirements. the numbers were fine until they decided to throw in the fact that i would be paying for shipping to their warehouse ( fob their facility!) and then of course I would be paying for their special labels to be printed and attached. They appear to be convinced that their margin is the only margin that matters and if i am willing to accept all of their requirements and a very low margin well then lets place an order! i have been trying to convince myself that this deal will help me move excess xmas inventory but really i am not happy with my margins ( ie they are very tight!) thanks for the post about having to convince yourself to make a decision - by reading your post i may have just made up my mind!
August 21st, 2008 at 9:53 am
Hi Cynthia!
I have been in similiar situations before… The first was with Nordstrom and they wanted a discount, I had to pay my sales rep her commission, everything would have to be rushed which would require me to pay a premium on the raw goods, I had to pay for all the labels/hangtags, have special hangers made…and that was just the beginning! I went ahead and did the order because, well…it was Nordstrom and I was convinced that they would be a good fit for me. I was wrong! All it did was create havoc on my cash flow and prevent me from sleeping for 6 weeks straight. In hindsight, I should have turned down the order or tried to negotiate better terms. I think that experience helped me have the courage to tell this one No. My first experince was a valuable lesson-and I don’t plan on repeating it anytime soon!
I wish you the best of luck with your decision…I know it’s a hard one!
All the Best,
Heather
June 20th, 2009 at 11:18 am
Love this story. Congrats on your success and smart decisions!
October 26th, 2010 at 12:35 pm
Great article Heather. It takes a lot of courage to say no to a big box. A lot of people would have struggled with the same thought process of trying to convince themselves that it was a good deal, even when they knew in their heart it wasn’t. I admire you for breaking through that and having the courage to do what was best for you and your business in the end. You are an inspiration to every small business owner like myself. Keep them coming Lil Firecracker. Thank you for a great article.