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Challenges, problems, and triumphs -- from a manufacturer's perspective.

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A Vendor's Reaction to the Provo/Cricut Issuee

It's not easy to take sides.

by Name Withheld (April 2, 2007)

(Note: The author, the vice president of a leading industry manufacturer, agreed to sign his name to this article, but CLN withheld it. CLN is designed to be a forum where everyone can express their opinions without fear of it hurting their business. So, because some chains and independents alike may disagree with the author, we've deleted his name.)

What Iíve "heard" is that Provo made independents invest about $8,000 in the Cricut for a 'Program"; thatís huge. Then I see that chains like Wal-Mart and Michaels sell it for less than what the independents are accustomed to selling at normal margins. The disconnect (and we will never know because no one will admit anything at the chains or Provo) is what price did the chains pay and what margins did they accept?

What the independents donít want to come to grips with is a mass merchant can live on smaller margins for these attention-getting items. Of course they can because of the volume they generate, and the tens of thousands of other higher-margin items to make up for the GM dollars given up. The ethics issue for me would be if Provo said everyone has to sell at the same price and then the mass decides to thumb their noses and ignore that. If Provo lied, thatís a problem and I would be on the side of the independent, that is where the fickle finger of fate must be pointed, not the mass merchant Ė unless the merchant agrees to sell at price X and they donít.

As a business doing business with the mass and independents, I can honestly say that Iíve had written exchanges guaranteeing the mass will sell at X and then they turn around, lower the price, or offer a coupon later, and stick out their hand asking for markdown funds (Thank God for the written documentation). The one comment that still frustrates me is when an independent says, "I just canít compete with Chain X and wonít buy your products because you sell to them." Okay, but you sell EK, Fiskars, Pioneer, 3M, and on and on and on and they are at Chain X. If you held all manufactures to that same standard, then you would be out of business with nothing to sell.

To end this, independent retailers need to be Creative! They have the small, knowledgeable staff and the welcoming environment in which to treat customers in a fashion that creates loyalty and word of mouth marketing Ė but thatís just the beginning. They need to do more than open their doors and expect sales.

1. They need to offer the right product mix for their market.

2. They need to offer it at prices their market can bear, not just keystone their cost and hope it will sell.

3. They need to advertise (ask manufacturers if they will assist).

4. They need to offer classes (Ask manufacturers for assistance).

They need to give consumers a reason to come to their store, not just sale price or crops or classes alone, but all things.

If they canít do this, then they shouldnít have started a business because they like to knit, quilt, scrapbook, or rubber stamp. They should be in business to do business and it just so happens that they are passionate for the craft too.

(Note: Agree with the author? Disagree? Email your thoughts to CLN at mike@clnonline.com. To read previous "Vinny" entries, click on the titles in the right-hand column.)



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