Dancing with the Big Box?

posted by David Wolf on Nov 18, 2007 | Comments (2) | Permalink | Trackback URL

As a small business owner, I’ve had my own adventures and misadventures doing business with big companies over the years. I am a partner in a commercial bagel bakery business in New Mexico region. Like all small businesses, this retail-wholesale bakery model has it’s own distinct mix of risks. Recently, I encountered a proverbial dance floor full of big box land mines. More on this later.

I’ll admit, I love the bragging rights when doing business with big box names. In our business, when you can tell somebody that you do business with say, Costco, Whole Foods, or Raley’s Foods, Albertson’s, well, it seems to give your little mom-and-pop operation credibility. But, this credibility comes with a price.

Any business has a risk profile, a matrix of items to manage to stay healthy and sustainable. Competition, quality, supply chain controls, customer behaviors, cost of goods pricing are just a few points on the matrix. But when small businesses choose to do business with big box companies, one must use extra care. Dancing with a big box can hurt if they step on your toes.

We’d been a local supplier to a group of Raley’s stores for a few years. And we had been a supplier to Whole Foods Markets. Both nice, big accounts for a small bakery such as ours. They were good business for us in terms of efficiencies. It was good business to talk about to others. Nice on the resume. A boost for top line revenues. Profitable. Most big customers do offer those things..Yup…nice big accounts can be good for business.

Here’s the catch. When you’re dancing with big players, the bandleader can yell, “snowball” at any moment, and at the least desirable time in terms of your business needs. In June, we got word that the Raley’s Food Stores (who we had serviced diligently for years), had suddenly been acquired by Albertson’s. And, suddenly, without warning, the dance was over. Then, about a month and a half later, I got a call from the folks at Whole Foods Markets announcing that November 17th would be our last day, and that they had decided to go with a “private label” bagel manufacturer.

In a flash, in a moment, we lost 25%+ of our wholesale revenue base. Our people got laid off. Our people lost hours of work. Wait a minute. Didn’t we service these clients wonderfully, unconditionally, 7 days a week? Isn’t our product a wonderful product that your customer love and buy every day? The answers are yes and yes. And yes to many other questions you might have about our commitment to doing the “right thing”. The dance with the big boxes can end at any time, for any reason. It isn’t enough to “do the right thing”. Frankly, it means nothing when it comes to managing THIS flavor of risk. The big box can throw the switch, yell “snowball” at any time, and end the dance.

And when that satisfying dance with the big box is over, you’d better be ready to collapse your resources and overhead, or could find your businesses’ survival on the line. I am not here to make the big box companies wrong. They decide what they decide for their own good reasons, just like us little guys. I’m just saying, make sure you know the dance can end when they decide, not you.

FILED IN: Management, Money Management, Productivity, Sales