Every small business probably has stories about vendors who are particularly difficult to work with. Let me describe my most difficult and irritating vendor, someone who sells me products that we resell in our stores:
- Most vendors try to set your retail price for you, but are seldom successful. Only in countries like Germany that make retail discounting illegal are such attempts universally successful. However, this one vendor is always successful at setting my retail price.
- Most vendors allow me a retail gross margin of at least 30-50% of sales to help me to make money on the sale of their product. They like me to make money, since that gives me the incentive to sell more of their product. However, this one particular vendor only allows me a 5% gross margin. Ironically, this products is on of the most difficult and time-consuming for our stores to sell, requiring ten minutes of sales time to gather all the necessary customer information and complete the transaction. Every single one we sell is a dead loss to us.
- Every small business has some vendors it struggles with on credit terms. I usually have to fill out a detailed credit application, and as the owner have to personally guarantee the company's payment on the account. Sometimes vendors will require a few orders be consummated COD so we can develop a history before they will go to a 30-day invoicing approach. However, this particular vendor goes even further. I had to set up a dedicated bank account into which I deposit funds for this vendors products every week. In addition, I had to obtain a $4000 bond to cover any non-payment in the account, and I have to hold the bond as long as I want to do business with this vendor -- in other words, there is no credit given for a long track record of performance on the account.
- This particular vendor has an "in" with the State of Colorado, which protects it by allowing no other competitive product to be sold in the state.
Give up? Well, most of you have probably guessed that this vendor is... the government! Or specifically, the Colorado Department of Wildlife and the specific product discussed is fishing licenses. That is why this particular vendor can get away with practices that no company that actually has to compete in the market place would ever attempt, and, in a couple of cases, gets aways with practices that would be illegal for a private company.
When I bought this company, we used to sell fishing licenses at many of our locations. I have pared this down to only the bare minimum number of locations, like marinas, where customers absolutely expect me to be able to sell them a license.