Three reasons you’ll be knocked off pt. 2

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 Their wholesale customers are frustrated by their outdated wholesale policies.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.

2 sales mistakes: pitching wholesale buyers by email
Why retailers become manufacturers

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8 comments

  1. Lesley says:

    funny…I seem to deal with alot of company C’s when sourcing fabric and trims. I’ve suggested they simply charge more for smaller orders and yet they stand their ground and will not change. I can’t imagine that anybody’s business is so hot that they can afford to turn away buyers.

  2. Erin says:

    I bet Company C is a family business. Seriously. Somebody’s kid who would rather be a dentist is in charge of their minimums policy and is being a jackass to even the score with Daddy or Big Brother. The problem is entitlement and weird psychodynamics.

  3. Morgan says:

    another GREAT article…but I thought, nonwithstanding all company C’s other issues that six minimum was still the standard these days? back in the day (well, it seems like forever from where I NOW sit) I worked for a very indie designer who had to cut her flex-min policy after buyers would take advantage by purchasing basically one-offs for themselves at trade shows @ wholesale cost, but pass on the line as it wasn’t a fit for their store….thoughts?

  4. Kathleen says:

    Lesley, old ground, I’m with you on that. Still, there’s a new trend afloat, got a private email about it that I’m wondering if I should print.

    Erin: surprisingly enough (I totally get what you’re saying and agree it’s often true), Company C is run by two best buds, chicas. KO is run by a married couple.

    Morgan wrote:

    I worked for a very indie designer who had to cut her flex-min policy after buyers would take advantage by purchasing basically one-offs for themselves at trade shows @ wholesale cost, but pass on the line as it wasn’t a fit for their store…

    I’ve thought some about this, used to agree with your indie designer entirely. A few things changed my mind. I think I’ll write a separate entry about it today.

    Amended: I’ve posted what your wholesale minimums should be.

  5. Carla Dawn says:

    Company C may feel stressed with keeping it’s 200 employees busy, this is a tough one, though you would think with their own domestic production capabilities they could creatively and with out too much difficulty figure out a way to accommodate more flexibility. It may need rethinking along other lines- like adding to theirs styles, offering less colors, tweeking the way they produce….

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