Thursday, January 3, 2008

Customers, Suppliers & Competitors Need to Make Money

Why do your competitors, suppliers and customers all need to make money?

The wholesale fashion business for boutique brand clothing is a small business community. Like many other niche industries, our competitors buy from many of the same suppliers and sell to many of the same customers.

If you're in the business you obviously want to be profitable, but to be successful your customers, suppliers and competitors will also need to be profitable. You may think; I understand that my customers need to be profitable to buy and pay for my products, but why the heck do my suppliers or competitors need to be profitable!

To gain a better perspective let's assume you're the retailer buying branded apparel products from fifty different suppliers. As a retailer you want to buy appealing products that merchandise well together and ultimately lead to purchases that ring the register. The key is cash flow, moving inventory from the sales floor to money in the checking account so you can pay your rent, employees and suppliers.

As the retailer if your supplier base shrinks, you can't offer your customers the diversity and breadth of product that a specialty store shopper wants. It's very important to your success to have a strong supplier base that continually reinvests in new product development so you can ring the register. Now that we've pretended to be the retailer, I hope you can see why it's important to have strong competitors. It's because the store owners you sell to need a vibrant supplier base in order for them to be able to pay you for your products!

So in order for my customers to be profitable my competitors need to be profitable? Yes, but you need to continually offer better products and value to your customers because that is exactly what your competitors are doing. Don't fall behind because you'll probably never catch up!

Part of being competitive is buying products from your suppliers on terms that are comparable to your competition. Note, I said terms and not price! I love responsive, dependable suppliers that continually develop new products. These are companies you want to partner with because it will enable you to be a responsive, dependable supplier that provides your customers with new looks that will sell well. These kind of suppliers need to be profitable to maintain your commercial relationship.

If a supplier shows promise, but doesn't fully meet your expectations you should obviously consider replacing this company, but be aware of the dangers of a supply chain disruption. I call this the devil you know versus the devil you don't know. Business people aren't idiots and if your supplier is not meeting your needs simply tell them what you expect. Eight times out of ten your supplier will rise to the occasion. The other two out of ten times, you just aren't that important of a customer and you'll need to find new resources.

In future posts I'll provide some tips on finding and developing new resources. But when you decide to part company with one of your suppliers, be straight forward and honest. Just simply say, 'I'm sorry, but you currently aren't meeting my expectations. I hope we can do business again sometime in the future.' Don't get emotional, use foul language or burn bridges because you may need this supplier sometime in the future!

I hope this parable has explained why your customers, suppliers and competitors all need to make money in order for you to be successful. Let me indulge and provide a couple links to some of our on line customers - La Bella Flora and Best Dressed Kids.

No comments: