24 October 2016

When your supplier becomes your competitor...

What would you do, if you found out that one of your suppliers that you've been with for years and years was now supplying one of your customers and selling to them at the same wholesale prices that they sell to you?

I am writing this with a sinking feeling in my heart, as I try to untangle the threads of making a living, running an ethical business, dealing with ethical suppliers and having fun. Two of my friends have set up a buying group and my supplier is selling to them at the SAME wholesale prices as they are selling to me! It is an unusual situation where I am very good friends with the two people that they are supplying and they have been very open with me and as their friend, why would I want to sell them stuff at a higher price than they can get it for? So, they are only doing what they need to do in these hard times to get by and who can blame them. I wish that I could be the one that could be providing them the service that they need, buying food at affordable prices.

I called the supplier today and it seemed to me the obvious solution would be for them to give me a bigger discount on the things that I am buying from them, so that I can offer my friends a more competitive price and then it is a sustainable solution for everyone. Everyone knows that to get wholesale prices you need to be a business and prove that you're a business and that some wholesalers sell directly to the public but they sell at the Recommended Retail Price, so that you are competing on a level playing field and the final decision is up to the customer. 

The supplier told me that they were not competing against me, or undercutting me....but I explained that if I buy a packet of tea at £2 and then sell it for £2.50 to the public and then if they sell directly to the public, for £2, a wholesale price they are most definitely undercutting me. They asked me what I wanted them to do and I suggested that they changed their pricing tiers so that their direct to the general public prices are Recommended Retail Price, their prices to buying groups are a bit lower than that and then the wholesale price is to businesses only.

Sometimes, when you phone up as an individual to offer feedback and suggestions, they can see you as just an individual with a one-off problem but this to my mind is a massive problem that could effect small, independent retails businesses across the UK, as if we are not already having a hard enough time of it already. You see, if the supplier shifted their prices ever so slightly, to protect their business customers, the supplier wouldn't lose out, the buying groups would still get a good price, if they wanted to put the work in and the retailer would still have a sustainable business. If the retailer is not supported by the supplier's pricing structure, then the supplier will lose their retail network and have to deal with individual buying groups and members of the public, which is fine, if that is their business model for the future but the business model that this supplier is using at the moment is not sustainable for all parties involved, which leaves me with the following questions as a retailer:

1/ Do I want to keep using this supplier?

At the moment, there is no motivation for me to keep using this supplier. In fact, for my business model to survive, I will have to track down a supplier that has cheaper prices for wholesale, lower minimum orders and does not supply to buying groups, or the general public at wholesale prices.

2/ Is it financially viable to keep using this supplier?

It is not financially viable to use this supplier, as they are more concerned about getting their income from anyone, no matter what, rather than having strict trading boundaries and price tiers for different buying groups.

3/ How can I make it more attractive for my friends to buy from me, rather than having a buying group? 

The only way that I can make it more attractive for my friends to start buying from me again is to either encourage suppliers to put up their prices for buying groups, or to bring down their wholesale prices even further for retailers. This doesn't seem to me to be a very imaginative answer but maybe there is another solution that I haven't thought of.

This situation, to me, is just a sign of the times, people are trying to live as good a life as they possibly can on the low income that they have and the internet has made finding information easier. Also, I am very open in business and get my catalogues out for people to choose things they want to order, Then when they see the name on the catalogue they go straight to the supplier themselves, who wouldn't. Then because times are tough, the suppliers are welcoming any business be it from traders, or individuals on equal terms.

When I called my supplier they told me that small, independent businesses are very important to them, I just hope they back that up by setting up a sustainable situation, that is beneficial to all the parties involved.

What do you think the solution is, what would you do if you were faced with this challenge, has this happened to you before, what solution did you find? Please let me know by commenting on this blog.

I have to say my suppliers got back to me really quicly and have offered to shift my pricing structure so that it is a fairer and more sustainable situation. I am now in a position where I can offer bulk items to my friend's buying group at the same wholesale prices that they were paying. This is great for me, as I don't lose trade, this is great for my friends as it should make it easier for them to budget and not have to accumulate such big orders, just to meet the minimum order level and it's great for the supplier too as they are protecting their independent retail customers and have made me feel the warm glow of loyalty towards them.

This is why I love dealing with ethical companies, made up of people who really do look at the bigger picture and the long term implications, rather than the short term gain. 
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