A recent bit of misinterpreted advice going around is that buyers determine wholesale sales policies. In fact, said advice suggested that buyers should use their own sales forms when placing orders because a vendor's sales policies don't favor the buyer. Other than saying that both are categorically false, I have two fast responses to this (detailed below). First is that it's a benefit to buyers generally that buyers don't dictate the conditions of sale and second, a buyer can use their own form if you allow it.
As to the first point: Imagine if you will what the marketplace would be like if buyers routinely determined sales policies for anyone else. In all fairness, this would include retailers themselves. Consumers could walk in, say they'd pay cents on the dollar, on store credit and return it any time they happened to feel like it and in any condition for full credit. Obviously a retailer would be outraged at the arrogance of a customer who would have these expectations so it does not hold a retailer could have special consideration they don't extend to their own customers. Legally, it is the seller who determines policies. The only exception I'm aware of is a public utility.
As manufacturers, you depend on getting full price for your stuff but are you always aware of the interplay at retail? Think about it; how your partners in independent and specialty stores are faring should concern everyone including consumers.
Two recent blog posts highlight the problem, first was from the Robin Report in Derailing the showroom scare:
A recent [study] revealed that 70 percent of consumers ages 25 to 54 with smart phones use them to comparison shop, up from 62 percent a year ago. And of those who use their smart phones to comparison shop in-store, almost one in three ultimately buys the product online... The [survey] found that 49 percent of consumers ages 55 to 65 use their smart phones to comparison shop... By shopping online, customers can save up to 10 percent on sales tax and potentially more off the price of the desired item. As price increases, so do the financial benefits of purchasing online. And the more commoditized the product, the more susceptible it is to showrooming.
This brings to bear a post Miracle wrote on how independent designers unwittingly reduce their selling opportunities at retail by printing their urls on hang tags and labels, and why retailers are reluctant to buy from you because of it. That isn't as important today as it was when she wrote it because most people know they can find you online even if your url isn't obvious so the more important question becomes -are you enforcing your price points? That's the real problem. If you want the scale and distribution, not only must you enforce MSRP (or MAP pricing) on your consumer direct sales, you have to enforce this policy with retailers who sell your products online.
Following up on the first post, today's entry discusses a consignment trend exemplified by a retailer I will call SA. This company has been selling young ladies apparel via the web for several years.
SA promotes an emerging designer's program that sounds pretty exciting to someone who is just getting started but it is not without formidable and costly risks. The least costly element of their program is the 40% commission they'll pay you. The rub comes in that if accepted, you'll be required to produce a minimum of 400 units per style and colorway. At the same time, your garments will have to be sized and fit in accordance to their guidelines. If this differs from pattern sizing you've developed previously or for an ancillary line, this represents additional costs all its own.
Keeping in mind that this is not a sale but consignment, they will hold your product for fulfillment (which they should of course) and pay you based on any sales that may arise of your items. If you don't sell anything... well, you're out a whole pot of money. Before that they will mark down your items; I don't have a markdown schedule so I don't know how aggressive it is. In any event, if the stuff doesn't sell within a prescribed time frame, you'll get it back less any shipping, handling and or warehousing fees.
Call it editorializing but it seems to me that consignment arrangements are evolving in truly draconian ways. It used to be that a designer and retailer came to terms and quibbled about replenishment, inventory shrinkage, shop worn goods and all that but the split was pretty standard (which I don't like across the board, you shouldn't do consignment). Typically that was 60/40 -in your favor but offers of 75-80/15-20 splits weren't unheard of for well priced in-demand goods. These days though, it's getting crazy out there so I'd thought to post a small reminder of what is typical or acceptable among professionals.
There are three examples I'll tell you about currently making the rounds:
1. What can only be described as a retail scam -today's entry
2. a retailer offering an "opportunity" to "emerging designers" for consignment ...(see pt.2 tomorrow)
3. a social media hip children's retail business scouring the intertubes for designers hungry enough to sign on. (pt.2)
The first company wrote me saying:
Today we have part one of a two part guest entry from Jessica Hanebutt Snell of Rockin' B Design, LLC who writes of her experiences at the recent WESA market show. Jess is an F-I member as well as a DE specializing in vintage-inspired ladies western apparel with a keen interest in all aspects of the western lifestyle industry as well as the vintage fashion community.
Even if you're not interested in the western or equestrian related products, this is a very educational snapshot on niche markets. As I've said repeatedly, the western market is much more sophisticated and upscale (very pricey!) than people realize. Lastly, many thanks to Jess for putting this together for us!
I had the pleasure of attending the January 2012 WESA market in Denver, Colorado last month. Held at the beginning of each year (somewhat obviously given the name), the January market is the larger of two annual WESA tradeshow events held at the Denver Merchandise Mart; the other WESA show is held in September in the same location. WESA stands for Western and English Sales Association, which consists of sales reps and manufacturers who specialize in western and equestrian lifestyle products. Anyone wanting to exhibit at a WESA market needs to be a member – this can be done by visiting their website and registering as a new user, then filling out the appropriate application. There are annual membership dues as well as applicable booth and show fees depending on your needs for the show (booth space vs. a permanent showroom, etc.) Exhibition space is allotted based on seniority points, which are earned via event attendance.
Today we have a post from guest author Jim Wiebe. Jim provided the source material for the the second entry in the series based on the EDI BootCamp class I took from him. Without further ado, here's Jim:
In part 2, Kathleen said “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.” Very true, but you are facing something of a chicken and egg situation here. You can’t put the necessary processes and logistics in place without the cash flow from orders to support it, but if you get the orders without the ability to handle them, it can be catastrophic. So how can you deal with this successfully? Well, you can have a carefully thought out plan in place, know what it will cost and how long it will take to come up to speed.
At this point, of course, you are going to have lots of questions. What is EDI and why do large retailers have all these 'compliance requirements? How is doing business with large retailers different than small stores and boutiques? Important stuff. For answers, you need to understand how large retail operations work.
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.
Any time a situation doesn't work out in whatever way, our natural default response is to presume malice when incompetence is more likely. Try to keep that in mind.
In the vein of How can we make it easier to do business with us? (and pt.2) many took the position that sewing contractors are bad, evil, arrogant or whatever because they didn't have web pages so potential customers could find them easier. I said it was more than that.
Hard as you may find this to believe, the problem is that the businesses you want to find don't know how to do what it takes for you to be able to find them -but they're willing to hire it out. Sounds like a slam dunk, right? Think again.
There is a critical lack of PR firms with sufficient grounding in the trade to understand the value of manufacturing products and services, much less know where to find or how to target a client's potential customer base. Lest that sound overly critical of PR firms, it's a near impossible job because this business is highly fragmented. There's no single publication or site where PR firms can place editorial to promote their client's interests. We used to have a variety of niche and regional publishers (Needle Trader, Kogos etc) but most of them are long gone. Others are too limited in distribution (Mannuscript, California Apparel News). Too few people read WWD anymore and besides, it's for retailers not manufacturers. Apparel is an option but it's intended for C-level execs rather than companies like you and even fewer read that now. Maybe a few of you read it but it's too darn few to be cost effective.
A topic in the forum gave me this idea. Or rather, it brought the point home for me. So many designers start lines because they've shopped the market and can't find what they like so they think the product or item doesn't exist. Once they get out there and mingle, they discover this isn't so true. There are plenty of product lines they didn't know about -and with much more competitive price points and positioning so said start ups are stuck trying to position themselves after the fact and in a defensive position no less. The tragic fact is that too many start ups don't look far enough afield. So my proposition is this:
On page 40 of my book is a worksheet one can use to define their target customer. Mine isn't the only one; it's SOP in most books. The departure should be a separate extensive list of related brands in the marketplace with a worthwhile and serious contemplation of their strengths and weaknesses. Some of this is done if one writes a business plan but again, I've never seen a plan that respected the exercise of competitive assessment with due diligence beyond the cursory. Frankly, if you do the job well, the conclusion one should come to at least half the time is that the market has been addressed and one should think of something else.
My friend Andrea (not her real name) sends a link to What China Should Learn From Hong Kong’s Luxury Malls and I know you're thinking, "so what does that have to do with me?". A lot -particularly in the context of a recent post from Iconoculture called Fury Over Fakes. Before I get to that, were you aware of the controversy of fake Apple stores in China? The case -which was discovered by a traveling blogger- has spurred international attention and fear among commercial enterprises. The summary of international discussion is that if Chinese businesses are ballsy enough to open fake Apple stores so convincing that employees thought they worked for Steve Jobs, what hope is there for any brand's integrity?
But back to Iconculture's Michael McCune who says:
...while US consumers are familiar with China’s fake iPhones and Fendi bags, fewer likely know that Chinese brands suffer the same fate. More important, Chinese consumers themselves are hurt when their children are at risk from toys with lead paint or their milk is tainted with melamine.
When national pride, health and their hard-earned yuan are on the line, Chinese consumers demand the genuine article. According to a China Market Research Group survey, the “overwhelming majority” of consumers said that their biggest fear in life was buying products that could harm their health (CNBC.com, 28 July 2011). The masses of angry consumers who’ve stormed the copycat stores and joined class-action lawsuits are an even better testament to how fed up they are over being duped.
Meaning, Chinese citizens are -surprise, surprise- your unlikely partner in maintaining your brand's integrity because it serves their best interest. Which circuitously returns us to the matter of luxury malls in mainland China vs those in Hong Kong because dontchaknow, Hong Kong is ranked as the world's best city for luxury shopping and by extension, a place you want to sell stuff.