ProblemStock
When your supplier starts selling to your customers
Your supplier has begun selling to your own buyers. Why he does it, what it truly costs you each week, the conversation to have, and what to change.
Your supplier has started selling to the same shops and houses you sell to. It is rarely a plan against you. Find out how far it has gone, ask him one direct question in person, then repair the two things in your own shop that made you easy to walk past.
The day you find out
A customer mentions it without meaning anything by it. "The company van came to our street on Tuesday, so I took two cartons from him." Or you see the same delivery vehicle parked outside a shop you supply, and the man carrying boxes in is the same man who unloads at your door.
Nothing has been said to you. Nothing was hidden either. Your supplier has simply started selling directly to the people who buy from you, at a rate you cannot see, and you found out by accident.
The first feeling is betrayal, and the first instinct is a phone call made in anger. Both are understandable and both are expensive. What you do in the following ten days decides whether this costs you one customer or a quarter of your trade, and almost none of it happens on the phone.
He is not doing it to hurt you
Understanding why makes the conversation much easier, so start here.
A distributor or company man is usually working against a monthly quantity he has to move. When his number is short, he does not sit and think about which shopkeeper he is undercutting. He goes to whoever will take goods off him fastest, and a housing colony, a canteen, a school or a large family buying in bulk will take a full carton without arguing about the rate.
Some of them are also being pushed from above. A company that wants to know its goods reach the end buyer will tell its own staff to open direct accounts, and the man in front of you is following an instruction he did not write.
And some are simply testing whether they need you at all. That one is real, and it is the version worth taking seriously, because it usually appears where the shopkeeper has become a small and predictable buyer who pays late.
Four reasons a supplier goes direct
- 1His monthly quantity is shortA colony or a canteen takes a full carton without arguing about the rate.
- 2The company told him toSome firms want their own staff opening direct accounts, and he is following an order.
- 3Your orders got small and thinA little of everything and a full carton of nothing makes you a stop out of habit.
- 4Your payment never lands on the dayA week late every time tells him this is not a serious account.
None of these four make it acceptable. All four make it fixable, which anger does not.
Work out what it is actually costing you
Before the conversation, get the number. Not a feeling, a number, because you are about to negotiate and a feeling cannot be put on a table.
Go through your own records and find every customer who has told you, or who you strongly suspect, is now buying that line directly. Add up what each of them used to buy from you in a normal week, and what they buy now.
Say four regular buyers moved one line to the van
An example, not a real shop. Put your own weekly figures in and the shape stays the same.
Two things usually surprise a shopkeeper doing this sum for the first time.
The first is that the direct loss on that one line is smaller than it felt. Anger inflates it. The second is that the loss around it is much bigger than expected, because a customer who now gets one line delivered to his door also stops making the trip that used to bring him into your shop for eleven other things.
That second number is the real damage and it is the number to carry into the conversation. Not "you took my line", but "four households stopped walking into my shop, and the goods they used to pick up on the way are sitting on my shelf".
The conversation, and where to have it
Not on the phone, and not in front of anybody. Go to him, or catch him at your own counter when the shop is empty. A man who feels accused in public will defend himself instead of listening, and a man on the phone can end the conversation whenever he likes.
Say what you saw, plainly, without an accusation attached. "The van was at Rehmat's on Tuesday. He told me he bought two cartons. I want to understand what is happening, because it changes what I order from you."
Then stop talking and let him answer. Most of the useful information in this conversation arrives in the first thirty seconds after you stop.
Four things to ask for, in this order
- 1Tell me where the line isWhich buyers he serves directly, and at what quantity. A number you can check, not a comfort.
- 2Do not sell into my streetNot the whole town. The few streets where your own customers live and walk.
- 3Give me the rate my quantity earnsIf he sells direct at a rate you cannot match, your rate has to move or the line has to go.
- 4First offer on anything newThe cheapest thing he can give you, and the one he is most likely to agree to.
The four asks in that list are in order of how likely you are to get them, and you should ask for all four even if you expect only the first two. A supplier who says no to the second and yes to the third has still moved.
What you must not do is threaten to leave unless you are ready to leave. A threat you do not carry out teaches him exactly how much your words are worth, and every conversation after it starts from a weaker place.
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The two things that made you easy to go around
This is the uncomfortable part, and it is also the part you actually control.
A supplier goes direct where the shopkeeper has stopped being useful to him. Useful means two things and only two: quantity that is worth his trip, and payment that arrives when he expects it.
Quantity. A shop that orders a little of everything and never a full carton of anything is a stop he makes out of habit. Pick the three lines that genuinely sell for you and order them properly, even if that means dropping two lines that do not. Depth in a few items beats a thin layer of many, and it also changes what you are worth to the man who delivers.
Payment. A shop that pays a week after the agreed day, every time, has already told the supplier it is not a serious account. You do not have to pay early. You have to pay on the day you said, which is a different and much cheaper promise. If keeping that promise is the problem, that is a cash question rather than a supplier question, and it is worth fixing on its own terms before it costs you a line. Buying stock on credit without choking your cash is the whole skill there.
What to change on your own shelf
Now the part that is yours alone, and it is where the money actually comes back.
Stop competing where you cannot win. If he delivers a bulk pack to a doorstep at a rate you cannot match, that pack is not your sale any more. Do not cut your own rate to chase it. You will lose the sale and the margin together. Sell the sizes and the convenience he cannot deliver, which is nearly always the small pack, the odd hour and the one item somebody needs right now.
Give the customer a reason that is not the rate. A running khata, delivery in ten minutes, a rate held steady when it moves everywhere else, taking back something that did not suit. None of those cost you what a rate cut costs, and all of them are things a van that comes once a fortnight cannot do. That is the same ground you stand on with any regular customer you want to keep.
Watch the two rates you now carry. Some of your buyers are households and some are small shops or canteens buying quantity. Those are two different rates for the same goods, and if you have been quoting one rate to everybody, the quantity buyers are exactly the ones a direct seller picks off first. Getting retail and wholesale rates straight in one shop is the defence there.
Fill the gap deliberately. A line that has gone half direct is a line to replace, not to grieve over. Another company will happily give you the shelf space he vacated, often with better terms, because a supplier who is not yet in your street wants in.
When it is time to change supplier
Sometimes the answer is that this relationship is finished, and it is worth knowing what that looks like so you neither leave too early nor stay too long.
Change him, or stay and repair it
Leave properly when you leave. Clear the balance, take a written confirmation that nothing is outstanding, and do not slam the door. Bazaars are small, and the man you leave badly reappears as somebody's brother-in-law at the worst possible moment.
And do not leave without a replacement already agreed. An empty shelf costs you customers faster than a difficult supplier does, and that pressure is exactly what pushes shopkeepers into worse terms. If this has made you think about spreading the risk, the honest comparison of running one supplier or several is worth reading before you decide.
Keep the record, so next time you see it early
The reason this hurt is that you found out by accident, months in.
The fix is small. Keep a simple record of what each regular buyer takes from you, so a drop shows itself as a drop rather than as a bad feeling. A customer who bought Rs 4,000 of goods in a normal week and now buys Rs 900 is a fact you can see in ten seconds if the record exists, and invisible for half a year if it does not.
That is all any khata is for. In Wasoolo each customer's page carries what he took and what he paid, so a customer who has quietly gone quiet is visible from the customer list without you having to remember anything. The supplier's side of it sits the same way: what you ordered, what you owe, and what you actually paid, on one page, on the day you need it in front of a man who says your figures are wrong.
You cannot stop a supplier from selling to whoever he likes. You can make sure you are the last person to find out about it only once.
Should I confront him in front of the customer who told me?
No. Thank the customer, say nothing about the supplier, and speak to the supplier alone later. A customer caught between two suppliers usually decides to avoid both.
He says he only supplies "big buyers" and I am not affected. Is that worth accepting?
Only if he will say where the line sits, in quantity, and hold to it. A promise with no number in it is not a promise you can check.
Can I ask him for a written territory or exclusivity?
You can ask, and a small shop rarely gets it. Ask instead for a rate that reflects what you actually buy, and for first offer on new items. Those you sometimes get.
My customers are asking me to match the van's rate. What do I say?
Tell them plainly what you can and cannot do at that rate, and what they get from you that the van does not. Cutting to match once sets the rate you will be held to forever.
Should I stop buying from him immediately?
Not until a replacement is agreed and your shelf is covered. Leaving in anger with an empty shelf punishes you and nobody else.
How do I stop this happening with the next supplier?
Be a worthwhile account. Order in real quantities on a few lines, pay on the day you promised, and keep a record clear enough to show him both.