Selling to department stores pt.2 (EDI)
In Selling to department stores pt.1, I mentioned the advantages and disadvantages to independents who want to sell clothing to department stores. Please read that first for context or little of this entry will make sense or will simply overwhelm you.
Continuing on. In that entry I listed 5 things you need to know about selling to department stores and provided links to flesh out the topics. In many ways, the post was an amalgamation of the many entries I’ve written on how to sell in the big leagues. The one item on the list that got short shrift was EDI or Electronic Data Interchange. Today’s entry is a start to correcting that omission.
Toward that end, I took a web based class last month called EDI Bootcamp with Jim Wiebe. Jim is the go-to guy for EDI and small apparel wholesalers. EDI could be described as an electronic protocol and software based logistics management tool. You can’t sell in the big leagues without it. In part, Wikipedia describes it like so:
For example an EDI 940 ship-from-warehouse order is used by a manufacturer to tell a warehouse to ship product to a retailer. It typically has a ship to address, bill to address, a list of product numbers (usually a UPC) and quantities. Another example is the set of messages between sellers and buyers, such as request for quotation (RFQ), bid in response to RFQ, purchase order, purchase order acknowledgment, shipping notice, receiving advice, invoice, and payment advice. […] In some cases, EDI will be used to create a new business information flow […in the case of] Advanced Shipment Notification (856) which was designed to inform the receiver of a shipment, the goods to be received and how the goods are packaged.
In short, EDI is a means to satisfying vendor compliance standards established by your customer.
The seminar opened with a definition of EDI and the potential penalties of a less than robust system; in a word, chargebacks. Again chargebacks have been discussed at length but Jim provides one retailer’s bone-chilling chargeback schedule which lists penalties. For example, if you cannot receive an electronic PO, the penalty is $150. Chargebacks are organized into various categories, each with subcategories relating to receipt of merchandise, PO errors, invoicing, not having floor ready goods, QC etc. All told, it is not unusual for the sum of chargebacks for a shipment to exceed the amount of invoice. Meaning, not only will your customer not send you a check but you’ll have to send them one.
Other segments of the seminar detailed
- EDI document specifications and codes,
- ASN (Advance Shipment Notice) tools and what those are,
- label and barcode specifications,
- planning and checklists for setting up a new trading partner,
- and of course, chargeback codes and terms.
Jim offered a lot of advice (strategy) on how to deal with various roadblocks and was generous in providing referrals to other specialists in the field. For example, he recommends using Jessica Butler for developing chargeback negotiation strategies. He says there’s no one better.
The only constructive criticism I could make about the seminar would be a suggestion to provide a syllabus or outline of the material that will be covered. That said, my opinion could be self serving in that it would have helped me to organize my review. By way of organization, Jim provides a tool kit which lists the documents he includes as part of the course material.
If you are interested in taking the class (the fee is $200), to be notified of the next available session. If you are interested in having him assist you with EDI implementation, call him at 310-745-1132. Frankly, I was shocked at how affordable his services are. He mentioned that he only charged $500 to one tiny company who has been successfully selling to Nordstrom’s. Considering how limited my time is and how complex EDI can be, I would consider $500 to be an incredible bargain to expedite my compliance (and no, I am not getting a fee for any customers I send him). Jim also told me that the figure I’d quoted in the first post, that of an EDI software and its implementation costing upwards of $10,000 is misleading at best. With the right guidance (presumably his -with which I’m inclined to agree), it can cost much less. Like he said, he has set up many companies for less than $1,000 -not inclusive of UPC codes or catalogs for retailers that require those.
One last thing bears mentioning. After having had this experience, I would say that no one should entertain the idea of selling clothes to department stores without having taken this class first. I realize that the $200 cost of the class can be a sizable investment with no guaranteed outcome but consider the big picture. When most start ups entertain the idea of sailing off to fame and fortune by acquiring a large store account, they idealize the process. What they really want is more returns for what they’re already doing -but that is not going to happen. Ever. If you want to move up to another level sales-wise, the process and logistics of how you service those accounts will have to move up to another level first.