Supplier Cancelled Contract - Business now at risk of closure

Discussion in 'Growing and Managing a Business' started by craigtg, Nov 26, 2014.

  1. craigtg

    craigtg
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    Over past year I have built up a small home business in e-commerce. It has taken a lot of time, effort and above all money to get my website to where it is but now my primary supplier (which accounts for 90% of our products) has decided to cancel our contract.

    It appears that this is simply due to them wanting to build their business with a couple of their biggest retailers.

    Unfortunately it appears as though my business will now have to cease trading with no way to make a return on the past years investment.

    Is anyone able to give advise on the best course of action? In a perfect world I love to recoup that investment from the supplier as I feel like I've been duped - although I realise this isn't really a possibility. I cant even sell my business (as I had planned to shortly) as I will have to withdraw all of the products. Any advice would be appreciated.
     
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  2. golden-process

    golden-process
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    What do you sell? What other suppliers could you work with?
     
  3. craigtg

    craigtg
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    We sell fancy dress. Unfortunately other suppliers do not offer the range or integration that we require.
     
  4. ludovic

    ludovic
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    Look at your contract. He can't cancel a contract like this (depends on your country of course) but you should have some protection or maybe some months before taking effect.

    One rule in the world : There is always a competitor somewhere who do at least the same thing. Most complicated is to find and deal with.

    If your business was good with regular customers...why not create yourself your fancy dresses?. Find a manufacturer, make and sell.
    Keep your motivation, you will find a solution.

    Last advice : never have a business with a supplier who has more than 33% of your order..too many risks (my opinion)
     
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  5. HooktoWin

    HooktoWin
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    Craigtg, I'm sorry to hear that you're going through this. I've been there and it's incredibly frustrating.

    It sounds like the products your supplier provides aren't unique to them. Here's a few steps you can take to recover and protect yourself in the future.

    1. Request terms from suppliers that give you more time in the event that they need to cancel.
    2. Stipulate when, how and why an agreement or relationship can be cancelled / ended.
    3. Consider subscribing to a service like Worldwide Brands. They provide suppliers that are vetted and verified.

    In the beginning it's not as easy (but still possible) to negotiate terms with a selected supplier. The more traffic, customers and clout you have, the stronger your bargaining position and the greater amount of leverage you have. When you're starting out that can be tough to acquire. Worldwide brands has a very large and well developed list of suppliers and it's helpful when you're looking to maintain a strong list of suppliers.

    You can recover from this.

    Don't give up!

    Andrew
     
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  6. craigtg

    craigtg
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    The contract stated 30 days notice from either party. I never thought this would become an issue, especially as they gave no indication that I was at risk of having the contract cancelled. I have tried negotiating but they have been pretty dismissive.

    Unfortunately I cannot get their products elsewhere as they are tightening up who they sell to. Thy are one of the biggest manufacturers and suppliers with the largest range. I can still buy wholesale I believe but this doesn't work for me as the business is built as a dropship website. Other suppliers offer a limited range and do not offer e-fulfilment, so I cannot automate the stock, products and sales processes.

    I tried to follow this up on the point of Unfair Contract Terms using guidance from the office of fair trading (UK), however that is related to consumers, not b2b.

    The irony is that over the past few weeks sales have been picking up. Had it continued I would have been on track to covering my first year startup costs. Im feeling angry, disappointed and left with a bill I'm going to be paying off for a long time.
     
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  7. HooktoWin

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    Craigtg,

    I'm so sorry you're going through this, it's incredibly unfair. I don't know the details or specifics of your situation but I thought I'd share an idea:

    Contact your supplier and commit to buying wholesale starting on X, for X period of time (with a minimum order of X).

    Here's why that *might* be helpful to you.

    1. It allows you to buy yourself more time to either (a) find another supplier (b) change your site so it can handle orders differently.
    2. You can keep things as they are now (e.g. dropshipping) and make it a must-have requirement in order for your deal to work.
    3. This gives you more time to find another supplier, or figure things out re: a wholesale order.

    The main component of this arrangement is time. You need time to be able to sort things out. I ran a search on Worldwide Brands just now and found there are 207 clothing providers that offer dropshipping. If even one of them offers the items and range you're looking for it may be worth a look. Whether you use them or not, buying time can give you the options you need to make it through this profitably.

    You have every reason to be angered by this. What your supplier did was wrong.

    You'll make it through this.

    Andrew
     
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  8. allcitycleaning

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    Hate to say it but this was a strategic mistake on your part. Of course that is history and now you must move forward. First thing I'd do is try to negotiate an extension of the contract to give you enough time to recover. Maybe you can get 6 months out of them. Second talk to them about why they are cancelling and see if you can fix the problem. You do have some things to negotiate with. You could change the terms. Take a reduced discount, etc. You statement that nobody else does what they do sounds more like you haven't looked far enough rather than it really being the case. Talk to other suppliers about setting up drop ship operations. Or find a distributer/wholesaler instead of manufacturer.

    By the way, it sounds like you have no legal recourse.

    Good luck.
     
    #8 allcitycleaning, Dec 22, 2014
    Last edited by a moderator: Dec 22, 2014
  9. digitalsignagesg

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    I'm sure you could find a similar new supplier. with a statement like that, you are just programming yourself to lose. For clothing and apparels, there are many other suppliers all around the world.
     
  10. craigtg

    craigtg
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    This simply is not true. There are only a handful of quality manufacturers of fancy dress costumes. Of 5, there are only three who support dropshipping. Of those three, only one offers fully automated e-fulfilment. I know my market.

    I do not sell generic clothing and I am not prepared to offer cheap imitations from China.
     

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