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.

Update: December 2021 - Another time to say “no” to retail distribution is if you have not built enough traction on DTC first. By DTC, I mean your own e-commerce store (i.e., Shopify) and not a 3rd party e-commerce site or marketplace. DTC is a great way to establish proof of concept, as well as to collect performance metrics to give you confidence that your brand and products will sell well in the larger stage of retail. De-risk your brand and product line first on DTC before moving into retail.

How To Solve Vendor Problems In The Retail World

Did anyone ever say to you, "and now the real work begins" after telling them you were just awarded business by a retailer? 

Pop! That's the sound your bubble just made when it burst. 

But that adage, while a big bummer, is grounded in truth and experience. 

The retail path is full of landmines. Do you know which is the most heart-wrenching of all the landmines I have ever experienced? Almost losing a retailer because we did not know what we did not know. 

Getting set up with a new retailer is like the black hole.  EDI, new item setup forms, replenishment audit forms, factory audits, insurance, WERCS, EFT, just to name a few. 

No one tells you what steps are needed to complete set up. No one can quote accurately how long it will take. No one can guide you on the intermediary steps required to complete each milestone. No one can tell you where to find that information. It's the blind leading the blind! 

Last month, a client was sailing smoothly towards their next deadline with Walmart. With just 5 days left, they were expecting to hit the deadline on time. All of a sudden, they were notified their Dun and Bradstreet (DNB) credit score had changed. For the worse.

Uh oh. 

A flurry of phone calls ensued. While the merchandising team can typically override DNB scores, the Divisional Merchandise Manager dug in his heels. He would not overturn it. 

More phone calls. Dun and Bradstreet (DNB) quoted a $12,000 fee to "revise" their credit score. But even with the payment of said fee, it would take 7-10 business days before their revised credit score would take effect. 

So with 5 days to hit the deadline, they pleaded with their retail buyer to extend their deadline. He said no. Even in the best case scenario, there would not be enough time left in his timeline to wait for my client. He apologized. His responses, brief. His tone, pessimistic. 

My client was crushed. They just lost the Walmart business after fighting so hard to earn it. It was heartbreaking, especially to have lost the business for a reason as silly as DNB. Note: See my post on Dun and Bradstreet for context.  

But kudos to my client. They did not give up. They sprung to action and pulled off the biggest miracle I have ever seen in retail:

They changed the mind of the retailer. 

They did several things that enabled them to "negotiate" with the retailer and hit the original deadline. And I'm honored to have been part of their solution. 

What did they do?

AKA "How To Solve Problems In Retail"

1. Lean on your peer network. 

Your peers are a wealth of experience and wisdom. I'd venture a guess that my peer network amounts to 200+ years of experience selling to this retailer. Can you guesstimate the # of years experience your peer network possesses? Probably tons! 

It's important to build relationships with your peers as you go through the product startup journey. Join Facebook groups with similar entrepreneurs, meet your booth neighbors when exhibiting at trade shows, get to know other brands selling to retailers you hope to work with. Not only can these relationships turn into future co-marketing partners or provide referrals, but they can also fill your information gaps. 

One of the first things my client did was tap their network of peer companies to ask for advice.

I stepped in to help. I contacted other Walmart suppliers I knew to ask them how they got around the DNB obstacle. I was also able to learn from them what hiccups to anticipate in the future.

No more flying blind for my client. 

After pooling our collective peer network, we were able to get money-saving advice and establish a clear plan of action. 

Your network is priceless...and it is FREE! So spend the time to contribute to your community of entrepreneurs. One day when you are in a bind, their help can be the difference between keeping a retailer account or a heartbreaking disappointment! 

Through this experience, my client realized they "don't know what you don't know" and needed an insider at Walmart who has "been there, done that" to help them avoid future mishaps. They turned to me and my peer network to identify a broker. 

2. Round out your team with people that fill you knowledge gaps. 

In this situation, a Walmart expert is whom we needed. We couldn't do this alone. 

Soon after the DNB issue popped up, I called my friend Matt Fifer of Selling To the Masses. I asked him to introduce me to someone who knows Walmart inside and out. He quickly reminded me of someone I had met a couple months ago who could help. That person worked at a local sales rep/broker firm. I called him up, walked him through our situation, and he prescribed an action plan. 

This local broker was 90% of the reason my client was subsequently able to hit their deadline. I won't share all their secrets, but having someone who knows their systems, process, terminology, how paperwork should be completed, who to call, and has long-term relationships proved PRICELESS. 

After they were able to salvage the business with Walmart, my client retained them as their Walmart broker. My client vowed never again to swim upstream without a guide.

Some things are best left to the experts who do this everyday and for a living. 

3. Build strong relationships on the inside - especially with the merchandising team. 

In the 5 months since this client was awarded business by Walmart, they had opportunities to get to know many people within Walmart, from Retail Link support to Order Specialists to the Vendor Master team. And over that time, they built relationships with these insiders. These people proved very helpful during times of trouble and helped point my client in the right direction.  Sometimes that extra few minutes or extra explanation means the world of a difference (and time saved!) in resolving a problem. 

My client had also established a great relationship with the buyer, and had impressed his merchandising team, all the way up to the Executive Vice President. Because the EVP believed in this brand, and with the buyer's help, we were able to get an override on the DNB issue. As a result, we hit our deadline and remained on track for my client's launch date in Walmart stores.

Despite all this stress, my client was able to maintain their relationship with their buyer. And because their broker had a good relationship with the Divisional Merchandise Manager, he quickly soothed any hard feelings after we went over his head. After explaining the circumstances (i.e., the $12,000 DNB fee), he understood. He was actually surprised and disappointed to learn such a fee existed. 

So while trite, it's true. Relationships are everything. And the value of relationships is most valuable during those times you are stuck in a bad situation. 

Entrepreneurship is a wild ride. The resourcefulness of whom you know - whether it is your peer network, the experts you hire, or your clients - will get you through those uncertain times.