Business Growth

3 Times You Should Say "NO!" To A Retail Distribution Deal

I wish more vendors/brands were willing to say “no” to retail buyers because the deal didn’t benefit them.

For the ones who did say no to me and stated their reasons, I respected and admired it. One reason I would hear would be because the brand was afraid of deteriorating their brand and angering their more premium retailers. Obviously I’d try to work with them to come up with a solution that would preserve their brand equity and my plans for them in my assortment, but if we couldn’t reach a win-win agreement, I understood the reasons why and never faulted them for it.

I WISH more small vendors said “no” to me. Here are some occasions when vendors SHOULD have said no, but didn’t.

1) Vendors who were in no financial position to be doing business with a major retailer. For example, those who agreed to sell to Target but had to stretch themselves to fund production. Or those who could not handle the cash hold we placed on new vendors. Yes, retailers hold back some of your invoice payment (amount varies, but it can be as low as $5,000 or as high as in the tens of thousands) to cover chargebacks or other fees.

2) Vendors who would have to take a substantial hit on their margins and/or lower their wholesale costs much lower than they had planned. Desperation does strange things to people, include making concessions that would hurt their profitability and long-term sustainability. Stick with the margins you budgeted for yourself at the onset of your business. Rarely does it make sense to lower your wholesale costs too much. Because that margin will already be eroded by the unexpected costs of doing business with that retailer. So to start off with a deflated margin only hurts you long term.

3) Vendors who have an untested supply chain and/or little manufacturing experience at high volumes. Many vendors said “yes” to me and hoped for the best when production time rolled around. Hope is not a strategy. I’ve seen many vendors flop because they couldn’t get inventory to DCs in time because they failed to foresee certain hiccups, resulting in penalty fees for late delivery. Or other vendors would learn that their factories couldn’t produce consistent quality product at high volume levels and when those vendors failed quality testing, I’d kick them out of the assortment, leaving them with unsalable inventory. Nothing incurs more wrath from a buyer than poor execution.

So don’t be afraid to say no to retail buyers. It is not closing a door, but rather, a step towards building a long term relationship.

They’ll respect your sound business judgment and think more favorably of you as a future business partner. Credibility is in short supply in the vendor community. Saying “no” can build more credibility than you realize.

Trending Retail News: E-Commerce Brands Are Opening Physical Stores

This is a trend all readers need to know about and follow.
"We believe that ‘pure play’ retail is going away, that e-commerce companies are either going to open stores or go out of business. And retailers need to be either excellent at retail, or they will go out of business. I also believe that Amazon cannot survive as a pure play retailer." Scott Galloway, NYU Professor.

The business takeaway is this: a brand cannot survive on e-commerce sales alone. While e-commerce continues to grow rapidly, multiple data points indicate that it will never overtake the market share of in-store sales. Physical store sales will always represent the lion-share of total retail sales. And brands who stick to solely e-commerce sales will see their sales growth plateau. 

Report Findings: Mobile and Social Media Are Key Influences of Purchase.

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Your Action To Be Taken:
Send this study to your retail buyers to showcase your expertise and add value to your relationship. Include in your email a synopsis of what your brand is doing to help retailers "win", specifically how your social media is helping to drive traffic and purchases in their stores.

Report Summary:
Ever since the dawn of online shopping and shoppers' ability to compare store prices on mobile phones, omnichannel has been a vital focus for brick and mortar retailers. For brands like yours, this meant having to reassure retailers you would manage your online channels to prevent "showrooming".

But now that we understand how consumers really purchase (which is, using online for product research, than buying in person), retailers are now revisiting the omnichannel concept.

For those who aren't familiar, omnichannel is about connecting different channels to give shoppers the ability to keep shopping, whether in-store, online, or on mobile. But a new report from Deloitte suggests that omnichannel may be an antiquated way of thinking. Instead, retailers need to adjust their mindset and start thinking of their business as one entity.