Don’t Put All Your Eggs in One Corporate Basket!

Sunde White illustrates her essay about a corporation buying her product

So last week Paper Source, a large chain stationery store, declared bankruptcy but not before they placed large orders with hundreds of small card businesses.  Once all those orders shipped out and were in transit, they made their bankruptcy announcement.  None of those small, mostly women owned businesses, are going to get paid.

Then it turns out that Paper Source hadn’t been paying their invoices for quite some time anyway!  The small card companies probably just assumed they would get paid for back invoices.

“ I mean, it’s a giant chain!”   I can hear them saying to themselves, “They are too big to fail, of course they’ll pay, it’s Paper Source!!”

So then they probably got in the psychological trap that Paper Source probably plays with all its vendors of –well, you either fulfill our orders or we’ll drop you.  Few small companies would want to risk a revenue stream that they figured would definitely pay, even if they were a little behind at the moment.  Welp, Paper Source didn’t pay and tons of tiny businesses are going to suffer because of them stringing them along.

It’s not just Paper Source though.  Any time a large corporation goes into business with a tiny company, it is at the peril of the small company.  The small business is at the mercy of the big one’s whims and they can and do destroy little businesses all the time.  It happened to me but I’m so grateful my business lived another day because so many aren’t so lucky.  Here’s what happened to me.

A few years into starting my business, I got the email all tiny businesses just starting out dream of.  It was from a nationwide chain store that was cool and hip and was a good fit for my greeting cards.  They wanted to carry three of my cards, a birthday cat floating in space, a unicorn birthday card and a bear thanking you for your awesomeness.  I was psyched.  This was it!

Everything happened fast.  They put me into their computer ordering system, I had to learn how to accept their orders and respond to them through this system.  There was some price negotiating even though my wholesale card prices are lower than most people’s, they wanted them even lower which I said yes to.  (I think I only lowered them by about 25 cents.)  I also had to figure out exact packing figures for them.  Like I had to put 100 cards into a small pack and then tell them how many little packs fit into one box.  There was a lot of mathy/detailed stuff that I suck at that I had to do that stressed me out.  Plus dealing with a full on corporation was freaky too.  They had really strict rules, like if it arrived a day late it would be rejected even if it wasn’t your fault.

But I was all in once the orders started.  Each order was for thousands of dollars.  For a tiny greeting card company like mine, this was a game changer.  With greeting cards, the price point is so low that it is a numbers game to make a profit.  Meaning you have to get a lot of orders for profit to start.

My cards sold well.  Each week they would send in emergency orders because my cards were selling out so fast.  I started to place big orders of those three cards with my printer so I wouldn’t find myself out of stock.  The large chain company was now my bread and butter, I didn’t want to lose them.

I spent every spare minute packing their massive orders and driving them to UPS to ship them out so they’d arrive on time.  I’d get emails praising me for how great my cards were selling. I was psyched.  I felt like how all entrepreneurs feel when something like that happens.  That it’s just the beginning!  The sky’s the limit from here on out!  With the chain corporation as my base of funds I could expand my business faster!

Luckily, I had read a book years earlier about being an entrepreneur.  The author wrote about how you should never put all your eggs in one basket. Like, if you’re a gardener and you get a giant golf course account, don’t let go of your other smaller accounts because what if the golf course account ends for some reason like a bankruptcy or change of management?  It will destroy your business because that’s your only client.  But if you keep all your dozens or hundreds of smaller accounts, if you lose one you still have another hundred, and if you lose a giant golf course client then you still have those smaller clients to tide you over.  In other words, don’t ever under value the smaller businesses you’re dealing with.   I’m proud to say that during this time, I didn’t.  I was vigilant about delivering my orders to all of my independent stores on time and maintaining a good relationship with them.

That turned out to be my best decision because one day my orders from the chain store stopped.  My contact person had just put in another emergency order and I was busy fulfilling it when I got an email saying all my orders were cancelled for the time being.  No explanation, just a polite, we’ll see what happens, for now the orders are cancelled.  I was left with thousands and thousands of the three card styles they had been ordering and a big hole in my bank account.

For months I waited for them to contact me again.  I tried to go over every interaction and figure out where I had gone wrong.  I felt cast out and embarrassed.  Like, I thought I had finally made it and then it was over.  I was back to the grind of struggling to make ends meet, I couldn’t humble brag anymore about the chain store I was in.  My self esteem was shrinking.  I never found out why they canceled my orders.  I knew my contact person had moved on so I guess the new buyer just wasn’t interested in my cards.

For a while I would pick people’s brains at trade shows to try to figure out what happened.  I finally talked to a rep (not my own) that explained it to me.

“You’re lucky actually that you didn’t lose everything.”  He said. “Chain stores can be dangerous to deal with for small companies.  They demand so much at no risk to themselves,  just risk to the little companies.  They take advantage actually.  I repped a company once that got picked up by Target, they had to slash their wholesale price and then had to up their production in China which was risky financially but Target was such a big opportunity they didn’t want to so no.  Anyway, 6 months later, Target cancelled their orders and the company never made their money back and was stuck with all the extra product.  It put them out of business.”

“Oh wow.” I said, “So I got lucky.”

“Ya, big chains do it all the time.  They take advantage of little companies to get variety in their stores at a low price because they know you want the opportunity, and then they’ll drop you with no explanation and you’re stuck with the consequences.”

Relief flooded over me.  After a year of feeling like it was my fault, or like I did something wrong or  I must not have been professional enough, my cards weren’t good enough etc. it turned out it was just a thing that happens to almost everyone.  And so I moved on.  I did what entrepreneurs always do, I found new ways to make money with my business and I consider it just a great learning experience.

What can you do, as a regular person looking for cards to buy or books to read or bikes to ride?  How can you help awesome small businesses in this country?  Do the little bit of extra work to order from a local store, seek out a company and buy directly from their website, not Amazon or Urban Outfitters or Target.

I get all my books from a local book store, it’s so wonderful and easy!  I just shoot them an email with the books I want and literally, within two days, I get a friendly email written by a human person saying my books are in the store!  It’s the greatest!  Please do this with all your products that you buy.  Most small independent stores will search out what you’re looking for if you contact them and they probably know so much about the industry that they could have really great suggestions to make your buying experience even more fulfilling.

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