The Wholesaler's Dilemma
My wife and I are in the stationery business. We sell almost exclusively through retailers. Their role is key: They help customers select designs from one of our catalogs and then figure out how to have it personalized. The retailer then sends the order to us.
Most of our competitors operate differently--they sell both through retailers and directly to consumers. People keep telling us that by not selling direct, we're missing a huge potential market. We have begun to think they may be right, but I've resisted. Right now, we have about a thousand retailers in our network, and they have hundreds of clients each. I don't want to have to deal with thousands more customers than we have already, and I don't think we should go into competition with our retailers. What do you think?
—Greg Geller, President and co-owner, Boatman Geller, Indianapolis
Greg Geller's query reminds me of an old joke: "The business would be perfect—if we just didn't have customers." There's actually a kernel of truth in it. No one can deny that more customers means more headaches. From that perspective, Greg has good reason to prefer dealing with 1,000 customers rather than with 100,000.
Headaches aside, there's also the risk that he might antagonize—and lose—some of his current customers by going direct. Greg told me that he had used the company's commitment to wholesaling as a selling point with retailers, emphasizing that Boatman Geller did not compete with them, nor did it ever intend to. If he were to change course suddenly, some of them would probably feel betrayed, especially those that do all or most of their business online.
But I think the clincher for Greg was my observation that it's a whole lot easier to recruit one customer who services several hundred customers than to sign up several hundred customers yourself. "That's the winning argument," he said.
NORM BRODSKY | Columnist
Street Smarts columnist and senior contributing editor Norm Brodsky is a veteran entrepreneur who has founded and expanded six businesses.