Picking up where we left off yesterday, a little recognized way you make yourself a target for knock offs is if you make it unnecessarily difficult to buy from you. Don’t make it so hard to buy from you that your customers go to your competitors and beg them to knock you off. It happens. More often than you’d know. Here’s the back story:
My friend Andrea called me the other day. This is the same Andrea from I can’t think of a spiffy title for this sales rep post you must read. She’s a retailer who does a bit of manufacturing to fill out her merchandising mix. She’s super-connected, whatever she says is solid gold. The long and short of it is you can unknowingly make purchasing so onerous that you drive your customers to your competitors but it’s another thing entirely to be so roundly inhospitable that your customers go to your competitors to ask them to knock you off. In short, they want your product even if it means they have to go to someone else to get it. The issue here is not lower price, it’s terms (see list of articles to read on terms at close).
Here’s a profile of Company C (being copied) and Company KO (knocking off). Both are privately held so no annual sales figures are unavailable.
Company C: In business since the late seventies, they didn’t get much traction until ten years later (actually closer to 20) with a signature piece that got a lot of press and loyal customers. Apparently a good corporate citizen, everything is produced in the USA by 200+ employees. They sell moderately priced goods (daily wear) in 100 different colorways to both wholesale accounts and consumers directly. As evidenced by a 2 week shipping black out to take inventory (!), they appear to have serious fulfillment problems in spite of 30 years in business. Their wholesale customers are frustrated by their outdated wholesale policies.
Company KO: Is much smaller (50 employees) and younger. While they also sell moderately priced goods, they’re known for items that are more innovative, costly and exclusive (“date” wear) with high consumer and celebrity loyalty. Based in the US, production is off shore in a western European nation known for high quality craftsmanship and not inexpensive labor. With 40 colorways, they also sell wholesale and consumer direct. Wholesale accounts are pleased with this firm’s sales and fulfillment policies.
In a nutshell, Company C’s sales policies are so onerous that their wholesale customers have tired of complaining about it and have asked Company KO (who they also buy from) to copy Company C’s signature pieces, pledging to do all their buying with them if they will. This is all the more remarkable because KO has many fewer colorways than Company C and colorways are critical in this particular niche. [And no, this doesn’t mean you should expand the number of colorways you sell unless you happen to be in this particular business.]
So what’s the rub in this case? It boils down to minimums. Company C has a six unit minimum per colorway. That doesn’t seem like much except Company KO has one. That’s right, one unit minimum per colorway. That’s as big a hint as I’ll ever give you with respect to minimums and colorways. Total minimum reorder for Company C is 24 pieces (4 colorways). Company KO is half that (12, in 12 colorways). Tell me, even if KO’s prices are slightly higher -and they are- who is a retailer more likely to buy from? If you say Company C, do not pass go, do not collect $200.
Andrea figures Company C doesn’t care about their specialty store business customers in ways that are meaningful to them, tragically underestimating their collective impact in this economic downturn. Six units per colorway is too much for many of them with limited square footage plus tying up money in inventory. It’s not that retailers aren’t willing to ride the long tail on less popular colorways but they don’t want to do it on six pieces when they must carry as broad a range of colorways as their budgets permit. Inventory ages quickly in fashion. Designs change and they can’t get stuck with last year’s styles lest they have to discount them.
We have no idea how many retailers must have complained or for how long to have inspired buyers to approach Company KO. Andrea estimates the knock off production time line was at least two years ago. KO’s knock off has been on the market for a year so product development probably took about a year before that. The foresight of company KO to act upon their competitor’s buyer’s complaints when they did can only be described as extremely fortuitous considering how terrible the economy has become in the last two years. Buyers have less money to spend now than they did two years ago so you can only imagine how competition for market share has seriously hurt Company C.
So the question becomes, how many years are we from when the complaints started -and why wasn’t the severity of complaints sufficient to justify policy changes on the part of Company C? It is my understanding that in spite of losing significant market share and even though they have the flexibility of doing their own fulfillment, Company C still hasn’t changed their minimums policy. It’s absolutely i.n.c.r.e.d.i.b.l.e in the truest sense of the word -not believable. It is at this point that confidence in the company erodes significantly in the community. I’m a nobody. I shouldn’t know this much about their business. If they haven’t listened and changed their behavior in spite of heavy damages, what else are they also not listening to that we don’t know about? Good thing I don’t hold stock in that company, I’d sell it, even at a loss. Better a loss than nothing -which is what their precipitous decline is suggesting. If I worked there, I’d be making other career plans.
In a nutshell: The smallest stores can drive knock offs of an established product line if they’re looking for partners who are easier to work with. It only takes pulling one thread to unravel a sweater. Don’t run your customers off. Don’t force them to go behind your back to your key competitor to buy stuff. The issue was never pricing (KO costs a little more), it was sales policies.
Related: What retail buyers care about
What’s your return policy? (forum)
What sales terms should be included on sales order form? (forum)
What are your minimums? (forum)
Meeting with a buyer (forum)
Buyer grumbles (forum)
Meeting with a department store buyer (forum)
Department Store Minimums and Terms (forum)
…along with 4472 other sales related posts in the forum.