Biz Miss

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My Distribution Deal November 10, 2008

This week I sucked it up and contacted a distributor.  I had been avoiding it for a long time because I didn’t think I could afford it.  After all, most distributors take about 20% of your wholesale price and I was doing fine on my own getting local stores to carry Sweet Meats.  I even had stores from other cities, states and countries contacting me about carrying my products.

But then I hit a wall.  I had a hard time finding stores outside of San Francisco that would be appropriate for Sweet Meats.  Those that I did find rarely responded to my cold calls (or cold e-mails) introducing my products.  Even those stores that contacted me weren’t responding when I followed up with line sheets and order forms.  I was spending many hours each week trying to drum up new wholesale business, which is only getting harder the more the economy tanks.

So I contacted a distributor.  For the past two years I’ve been getting his wholesale newsletters, so I know how hard he pushes for his clients.  He was also a customer of mine a couple of years ago and several of my sisters-in-plush use him, too, so I know he’s honest and reputable.  His 20% commission definitely takes a big bite out of my profits, but I figured I’d end up paying that much in warehouse storage before I sold everything anyway.

Our conversation was incredibly simple.  He already knows my products, and I already know his company, so there was little needed in the way of introductions.  What I didn’t know, however, is that his is not a drop-ship business.  He warehouses all of his clients’ inventory–for free!  This made the deal infinitely sweeter. I currently pay about $150/month for storage (it started higher, but has gone down as my inventory has decreased).  That means that I’m not losing any money at all on his commission for the first $750 in monthly sales.  I don’t know if such a set-up is the norm, but if I had known, I can tell you I would have called this distributor six months ago.

The lesson?  If you’ve just started your own line, there’s no harm in calling a few distributors and comparison-shopping.  There might be savings in the deal that offset an otherwise unafforable commission.  Now that I no longer have to worry about my wholesale accounts I can focus my time and energy on my retail business, which pays twice as much per sale.  Win-win!