Please listen closely, dear makers and product designers: I’m throwing myself at your feet, imploring you not to get stars in your eyes when it comes to corporate retail deals.
Corporate accounts are the big, flashy accounts that many makers dream about. These details usually involve multiple locations (sometimes hundreds of doors, sometimes just a few dozen) that are all managed by a singular corporate entity. You know the ones: Nordstrom, Macy’s, Target, Sephora, Paper Source, Dean & Deluca, Anthropologie, Urban Outfitters… there are dozens and dozens of coveted corporate accounts that many makers are itching to crawl into bed alongside.
Over the course of my fourteen years as a full-time maker, I’ve done business with many corporate retailers. I’ve also helped dozens of makers navigate these relationships, giving me a unique peek inside the collaborations that so many of us covet. And while I’m huge proponent of dreaming big and scaling up a business, I know all-too-well that corporate retail deals aren’t right for every brand. Before you tee one up, I hope you’ll make certain that it’s a good fit for your business.
THE BALANCE OF POWER SHIFTS SIGNIFICANTLY WHEN YOU’RE WORKING WITH CORPORATE ACCOUNTS.
These accounts expect you to have a game plan together and they offer far less flexibility than your friendly neighborhood boutique. Why? Because there are a lot of legs on this octopus.
The owner is not the buyer. The buyer is not the person who unpacks and inventories the order. And that’s not the person who puts merchandise out on the sales floor nor the person who rings the sale and wraps the parcel for you to carry home. Corporate accounts are highly systematized and the buyer is, in essence, a conductor who’s managing a dizzying number of logistics. They’ll expect you to climb aboard the train and keep your promises in order to ensure that the orchestra plays on.
Because these relationships involve more people, there will necessarily be more complexity and more coordination. Corporate accounts often mandate that orders are packaged a certain way, tagged in a particular fashion, shipped on a precise date, etc. They don’t want it a week early and they certainly don’t want it a week late. Working with corporate accounts may find you buried beneath a tidy stack of paperwork and wading through vendor manuals that explain the intricacies of order fulfillment.
You’re the sister-in-charge when working with independent stores. You call the shots, informing them how things will be packaged and delivered, and detailing how you expect to be paid.
However, the balance of power radically shifts when you crawl into bed with corporate accounts. They’ll tell you how they do business. You have to decide whether or not you can work within those perimeters and if you can’t, then you’ll need to pass on the account.
CORPORATE ACCOUNTS BOAST MUCH LONGER TRANSACTION TIMES.
There’s a common misconception that corporate deals are the fastest way to scale an artisan brand. Um, no. Let’s put that myth to bed once and for all…
These deals can take many months to bring to fruition. Generally speaking: the larger the fish, the longer the amount of line you’ll need to reel them in. Corporate deals aren’t an ideal solution if you desire is to grow your company quickly. Without a doubt: if a corporate account places an order, then certainly- that will help you ramp up business and scale. But if you need orders tomorrow, corporate accounts shouldn’t be the primary focus of your attention.
These deals take a substantial amount of time to nurture and working with these accounts requires a potent combination of strategy and patience.
THE FINANCIALS OF CORPORATE DEALS CAN BE OVERHWELMING TO SMALL BRANDS.
There’s no doubt that corporate accounts have enormous buying power, which is both good and bad news. Good news? They’re capable of placing orders with commas and zeroes. Bad news? That enormous buying power puts them in the driver’s seat for price negotiations, and they often use it to extract preferential pricing, which clocks in below normal wholesale.
And they frequently work on trade credit, too, meaning that they buy now and pay later… leaving you to float the financials between order placement and pay day. It’s good to be king!
How would you like be on the receiving end of a $25,000 order? Hells to that yeah, right? What brand couldn’t use a $25,000 cash infusion? But if that $25,000…
• Bills on net 90 terms (meaning that you’re paid 90 days after the order is delivered) and
• Your COGS (what it costs you to actually make the product) comprise 50% of your wholesale price…
Then you’ll need to round up $12,500 to front that order, with the understanding that you’ll receive a check in 3 months. That’s a bit painful.
If you’re a business who’s just beginning to cut your teeth on wholesale, that type of order could translate into major cash flow problems. It might entice you to venture out on a limb that perhaps isn’t yet sturdy enough to support you.
On related note: the volumes associated with corporate accounts will likely prove overwhelming for new entrepreneurs and solo makers. You should consider working with corporate accounts once you’ve refined your production process and supply chain, when you have some experience packing out larger orders, and the capacity to finance the order without losing 3 months of sleep.
CORPORATE DEALS OFTEN HAVE “BUY BACK” CLAUSES.
Buy backs are a contractual obligation that requires a vendor to “buy back” their own merchandise if it hasn’t sold within a specified period of time.
Let’s suppose that you’re an apparel designer. Nordstrom places a juicy order with you for Spring of 2017. At the end of the season, your contract may well stipulate that you’re required to buy back every piece of clothing that remains unsold. You’ll buy it at an agreed upon price if it hasn’t sold within the contracted time period and you’ll return it to your inventory.
Not all product categories and not all corporate entities have buyback programs but they’re definitely something to keep an eye tuned to. Don’t get me wrong: cashing that first big check is hella fun… until you have to dip into your back account six months after you’ve spent those funds.
Please know that I don’t mean to scare you off of corporate accounts. They can move your ball forward in powerful ways. They can deliver big, handsome piles of cash at your feet. They boost brand cachet and build exposure. Yes, corporate accounts carry a host of benefits, but they’re not for everyone. And many of the makers that I see drawn to them like moths to a flame are particularly vulnerable. Each of us should know what we’re getting ourselves into before we dive in with both feet!