Mar 8, 2008

Minimizing Minimums

I was recently looking at a new paper company who made their debut at CHA Winter. They have about 2 dozen lines of paper in two different "themes" plus 3 or 4 die cut embellishment sheets. Each pack of paper runs about a 11 dollars wholesale.

Their minimum opening order is $250 with reorders being $100. Those seem to be the "magic numbers" for a lot of paper companies. But, here's why that's way too high.

In order to meet that minimum order, I would have to buy every single pack of paper they sell. That would be just slightly more than the $250 opening order. That presents me with a problem - even if I'm a store owner. That means that I must now fill a dozen paper slots in my racks with the paper from ONE company. That's just not going to happen - especially for a company like this one with very specifically themed paper. If I have, say, 48 slots for paper in my paper racks, that ONE company wants me to devote 25% of those slots to their paper. I would have 300 sheets of just ONE look of paper to sell through before I could place another order.

So lets say I give them 6 slots. That means I still have to store 6 other packs of paper (and hope the 6 I filled turn over quickly).

Then, when I go to reorder the paper, I still have to buy NINE packs of it to meet the reorder minimum. That is a tall order for even a bricks and mortar store.

I hear paper companies say, "I want you to get a good flavor of our line". Okay, but I can't sell JUST your line. How about a lower minimum and a variety "try me" pack for the first order? If it sells well, I'll order more. But if my customers don't want it, I won't be forced to dump it all into the clearance bin for a loss. It's better to have retail customers place lower orders over a longer period of time and have more smaller orders more often, then to have customers buy one big dump of an order that takes them 6 months to turn over and leaves them with a bad taste in their mouths and the impression that your line doesn't sell well in their store.

I honestly don't think that any new company should have an opening order that exceeds $100 - especially when their line is limited to just a few designs. I'm sure this company got a ton of orders at CHA, but there may be many months of a lull now before the re-orders roll in. I'd rather even out my cash flow with smaller, more frequent orders. That makes more sense for my bank account than eating steak one night and then Ramen for the next 30.

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