I recently took a call from an upset retailer who had discovered that a competitor right next door stocking our cards and displaying them in their window in the same way as they did. Our retailer had only started stocking Blue Eyed Sun last year and within a short space of time our cards were making up over £10,000 of their sales at retail in a small town with a population of 18,000 people. This was a significant portion of their turnover and profits. Without exclusivity, our customer felt that their business was under threat from the competition and went so far as to say that they felt that they would be forced out of business if they didn’t stock our cards.
I totally felt for the customer and was shocked to hear of the clash as we actively go out of our way to try and prevent these types of incidents occurring. We don’t guarantee exclusivity, although where possible we try to protect the interests of our independents and meet their needs as best as we can. For years I’ve wanted to have a simple system for managing clashes. I’ve learned that it’s almost impossible to have a black-and-white rule about this, so we deal with each on a case-by-case basis. Our processes have been further complicated by the rise of brokerage, especially among independent gift and card shops.
Brokerage is a system whereby a single large publisher plans and manages the card pockets in a shop; often on behalf of several publishers for the retailer. Traditionally implemented by the large multiples, smaller independent stores have been using it to reduce staff costs and simplify systems. These upsides tend to be offset by the lack of flexibility of ordering and reduced pocket numbers of successful smaller niche publishers like ourselves.
Brokerage works well for companies like us when selling to larger stores or into small independent stores that sales agents don’t frequent. It can cause problems when a good current independent customer switches to brokerage and no longer requires our sales agent’s services. In these situations we can often see sales dip by as much as 80% due to the restricted number of pockets we may get through the broker. The situation is less than ideal for us and our sales agents. The alternative of losing all sales from the store by not taking part in the brokerage scheme is even worse.
Because we have excellent relationships with our brokerage providers we are able to say yes or no to any opportunities that are offered to us. In this particular instance the competitor’s shop had slipped through our usual safety net of checking for clashes. At first glance the problem appeared to have a simple remedy: we notified broker and said that we can no longer supply the competitor’s shop.
However, the competitor stocked certain Blue Eyed Sun card designs that were not included in the brokerage plan. Furthermore, we ourselves had not sold these extra cards to the competitor. We know exactly what cards of ours brokers put into the stores and we have records of what we sell into any shop. We discovered that the competitor has a relative that also uses the same brokers for their shop in a different town.
This makes the situation even more complicated. The relative’s store is our main shop in that location and we have been selling to them for longer than our upset customer. What do we do? Do we turn down both competitor shops to appease our unhappy customer? Do we say sorry to our customer and keep selling to the relative, albeit with less margin through brokerage?
There isn’t an easy solution. I’ve always valued loyalty so the longest serving customer usually wins. Equally I don’t like upsetting customers so I can’t always find a win-win solution. What’s the right business case for this? Chase the biggest revenue or look after the loyal, long standing customer? For me personally it’s not always about the money. My loyalty has probably cost me many thousands of pounds over the years by being sticking with certain customers, agents and suppliers when a more ruthless businessman would have moved on long before. Not to say we never have though.
When we were starting out we had a tiny gift shop in South West London approach us wanting to stock our cards exclusively and not to sell to anyone in their area. The retailer didn’t order more than £300 worth of cards a year and frankly that was no model for us to sustain our growing business. We had to turn her down in the end. As we did a small boutique shop in Brighton that wanted the same deal and for the cards to be sold in consignment, which meant that we were only paid when our products were sold to consumers from the shop.
Some businesses are built on the consignment model and they have done very well. It’s not one that would work for direct to retail publishers like us though. Card publishing is to a large extent a volume game and so just selling to tiny, boutique shops who only want exclusivity is probably best left to small, one-person local handmade publishers. The trouble with this approach is that those retailers are then buying from inexperienced publishers who may not know how to produce best selling cards. Stocking your shop with cards that look different but don’t sell is a different problem.
I’ve spoken to many competitors about exclusivity over the years and have had a mixture of responses. One publisher actually felt that dealing with larger retailers had brought more independents to them as they thought that their cards must sell well if they are in the multiples. Interestingly it’s never the multiples (large or small) that have an issue with exclusivity. One retailer friend of mine who owns several shops doesn’t care if cards he sells are in shops nearby. All he focuses on is how well product sells in his shop.
I’m a big fan of watching the numbers in business as they don’t always match one’s gut instinct. The numbers don’t deceive like your feelings can. If you think sales are likely to be damaged because a publisher you stock is also in a shop nearby then it’s important to watch the sales to see if it’s really true. It’s easy to get emotionally invested in a range that you’ve trawled the miles of aisles of Spring Fair to find. It’s also easy to assume that because they appear in your neighbour’s shop that they must have copied your hard work when sourcing the same suppliers. Our brains can deceive us in this regard as we fall prey to cognitive bias which might, in truth, just be coincidence.
The main reason that exclusivity is so important to retailers is not necessarily one of greed and wanting to have a monopoly on certain publishers in their town, it’s because differentiation from competitors is so important to business success. Not only are cards good bread and butter sales that keep shops going in quieter months, they are also strong visual products that are used to create a ‘look’ in retail stores. The way shops look and therefore feel is key to consumer experience in shops. If a retailer has spent a lot of time and effort creating that look with their stock selection it can be frustrating for them to see the same thing across the road.
Fortunately there are lots of great suppliers out there and one can still keep best sellers in stock whilst differentiating your shop window and interior with unique, well thought out displays that are regularly changed. We have similar issues on the publishing side with similar ranges to ours appearing in the marketplace. The trick is to keep moving forward, trying new things and regularly bringing out fresh new products. Although it’s hard work, if you are one step ahead then the competition are always one step behind.
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