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Originally Posted by Scroopy Noopers
Interesting... I wasn’t for the idea, and if you don’t own a space heater you absolutely should. It just makes sense.
But, For my own interest, why would the supplier eat this? Are items sold at Canadian tire on consignment? I thought they purchased product in bulk, to then sell. They own it, no? I know nothing about this world. Way off topic so I’m sorry about that.
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Okay, I'll tell you my understanding of how this world works and maybe somebody else with more knowledge can chime in.
I own a manufacturing company. Over the past five or six years, I have made some contacts in China that do some of my manufacturing for me on cookie cutter-type items. As such, I can buy in bulk for insanely low prices. Pretty much how everyone making anything does stuff.
So, one of the biggest chain stores there is contacted me looking for some of my product. They would buy it all with a PO, but in the contract, there were these red flags:
- All returns I would have to pay to have shipped back to me. They wouldn't throw them out if it was cheaper than shipping them. I had to bring them back at my expense.
- They could change the price at any time they wanted to move product. If they lowered the price to below the cost at which they paid for them, I had to pay them the difference. For example, if I sold them a product at $10, and they sold it on sale for $6, I then owed them four more dollars. Seems unfair? Yeah, it is, but they're not negotiating any of these points with somebody my size; the risk is 100% on me and 0% on them.
- If they decide they no longer want to sell my product, I have to buy it all back from them and pay to ship it back to me. Imagine outfitting every store in Canada with multiple locations in each town and city with my product and potentially having to buy it all back or pay them if they sell at a price below cost.
It's an incredible risk, and if your product is already in the stores that means the grinded the #### out of you on price to even stock it in the first place. Your margins are razor thin, so you're counting on the bulk sales. Every return cuts into that margin. These big stores bankrupt businesses taking on the enormous risk of supplying them.
Ever bought something from a store like Home Depot, Wal-Mart, Costco, etc. and try to get spare parts and they tell you they don't sell that line anymore? Yeah, it's often because the company who supplied them won't do it again or is bankrupt.
When I was approached to supply one of these huge stores I was really excited at first...like I thought my ship had come in. After reading the contract, I felt nothing but pity for people that sign on and supply to the big stores. I think you need to be big enough to have some negotiating power or your margins have to be high enough that you can swallow the shenanigans customers and big box stores try to pull on you. At my size, it was a non-starter, but I know guys my size and a lot bigger who have dabbled with these big stores and totally lost their shirts.