Competing against your supplier

[ArabianNights]

Evening all.

What would you do this in situation? I am working on a new eCommerce start up, and was doing some research on competition. I got my list of competitors. After doing some more digging and using my gut instinct, I notice that at least one competitor sells the exact same products at around the same price that we anticipate to sell at. More digging later - checking out Companies House website, low and behold, I can confirm that our wholesale supplier is actually also trading as a retailer using a different trade name to what they use as a supplier. I suspect some of the other competition / retail websites on my list are the same people - our supplier.

Where do we stand in this situation? The ultimate concern here is, if we sell products cheaper than our supplier does under the guise of a different trade name, they could I guess decide not to supply us. But on the other hand, they are making money by supplying us. Are there any laws surrounding this? We do have other suppliers in the pipeline, but they are mostly in the EU. Thanks

 

[Red Wood]

No laws, they'll just cut you off when they work out it is you who are undercutting.

 

[Lucan Unlordly]

Evening all.

What would you do this in situation? I am working on a new eCommerce start up, and was doing some research on competition. I got my list of competitors. After doing some more digging and using my gut instinct, I notice that at least one competitor sells the exact same products at around the same price that we anticipate to sell at. More digging later - checking out Companies House website, low and behold, I can confirm that our wholesale supplier is actually also trading as a retailer using a different trade name to what they use as a supplier. I suspect some of the other competition / retail websites on my list are the same people - our supplier.

Where do we stand in this situation? The ultimate concern here is, if we sell products cheaper than our supplier does under the guise of a different trade name, they could I guess decide not to supply us. But on the other hand, they are making money by supplying us. Are there any laws surrounding this? We do have other suppliers in the pipeline, but they are mostly in the EU. Thanks

It's not unusual (sadly) that suppliers also sell direct, but they more often do so at full recommended retail price. Is that the case here?

 

[fisicx]

Your supplier will be doing the same research you have done and may well decide not to supply you anymore. Run your own business and don’t worry about the competition.

 

[JEREMY HAWKE]

We a rule in this industry for sub-contractors
You don't poach business

 

[WaveJumper]

All of the above and my advice for its worth would concentrate on offering a first class service rather than a race to the bottom on price

 

[simon field]

Put the shoe on the other foot.

How would you respond?

 

[ArabianNights]

It's not unusual (sadly) that suppliers also sell direct, but they more often do so at full recommended retail price. Is that the case here?

No. Actually they would be a #1 competitor

 

[ArabianNights]

All of the above and my advice for its worth would concentrate on offering a first class service rather than a race to the bottom on price

Yes, that is the plan. And also work with other suppliers.

 

[ArabianNights]

Thanks for your input everyone. So I have checked the OFT website and there is a document on there about competition laws. They actually used my situation and the consequences of it as a prime example of how competitions laws can be breached. I will have to call them today and get some advise. Thank you

 

[fisicx]

Thanks for your input everyone. So I have checked the OFT website and there is a document on there about competition laws. They actually used my situation and the consequences of it as a prime example of how competitions laws can be breached. I will have to call them today and get some advise. Thank you

Don’t think this applies. The law is more about price fixing or restrictive practices. The supplier is not doing any of this.

 

[ArabianNights]

Don’t think this applies. The law is more about price fixing or restrictive practices. The supplier is not doing any of this.

The Office for Fair Trading doesn’t exist anymore, it’s now become the CMA - who regulate competition law. But according to this handbook I have seen from the OFT, the information from which, would be still applicable as it discusses Competition Law; It’s illegal for a company to misuse its dominant position in the market. According to them:

“The Act also prohibits abuse of a dominant market position. This mainly applies to businesses that have a large market share, usually 40 per cent or more.
Other factors taken into consideration in determining whether a company is dominant include the number and size of competitors and customers and whether new businesses can easily set up in competition.
The type of practices that could indicate abuse include charging unfair prices or imposing other unfair trading conditions on customers, limiting production, or refusing to supply an existing customer without an objective reason. The OFT can also assess whether an abuse may affect trade”

Also says:

“There are a number of signs that may mean a business you deal with could be breaking competition law. These include:

• a supplier prevents you from selling their products at a discount
• a long-standing supplier decides, for no apparent objective reason, to stop supplying you”

So I think according to Competition Laws, I could be covered, though I need to get some advise.

The .gov website discusses more or less the same thing about businesses using their dominant positions to undermine other businesses here:

Avoid and report anti-competitive activity

Understand and avoid all types of anti-competitive and cartel activity including price-fixing, collusion, bid-ridding and sharing markets. Know how to report concerns to the CMA.

www.gov.uk

In case anyone else is interested, the OFT handbook that I am referring to is here:

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/284428/oft911.pdf

Although the OFT doesn’t exist anymore, the information in the handbook would still be valid.

I think it’s important for all businesses to be aware and have something to stand on, in the eventuality that a supplier suddenly stops supplying you without reason and potentially put you out of business. Also highlights need to diversify suppliers to, I guess.

 

[Paul Kelly ICHYB]

@ArabianNights Don't waste your time with the OFT, focus on your business.

• Sell on service, not price
• Find another supplier
• Source your products direct (unless your supplier is the manufacturer!!)
• Adjust your range.

The internet and direct sourcing has disrupted market places generally. Traditionally, suppliers who sold direct would sell at RRP (or similar) to set the pricing level for their customers to make a margin on. Then companies/people who are prepared to make less margin (or had no idea about business and trading) started dumping prices and sourcing direct. Rather than using lower costs to make more money, they become greedy and want more sales, so reduce prices further, which creates busy fools and drives the market down.

 

[simon field]

As above. Competition is healthy.

 

[ArabianNights]

@ArabianNights Don't waste your time with the OFT, focus on your business.

• Sell on service, not price
• Find another supplier
• Source your products direct (unless your supplier is the manufacturer!!)
• Adjust your range.

The internet and direct sourcing has disrupted market places generally. Traditionally, suppliers who sold direct would sell at RRP (or similar) to set the pricing level for their customers to make a margin on. Then companies/people who are prepared to make less margin (or had no idea about business and trading) started dumping prices and sourcing direct. Rather than using lower costs to make more money, they become greedy and want more sales, so reduce prices further, which creates busy fools and drives the market down.

You are absolutely spot on, and I agree. You are correct. In an ideal world.

Unfortunately we do not live in an ideal world, and it’s all about undercutting and making money now to the extent that businesses are now using certain practices that could be perceived by me and you as unethical. A supplier selling direct at RRP and allowing room for their customer who they supply to make money, is the ideal situation. But we can never know the intentions of these companies. As they they say in that saying which now escapes me - the biggest corrupter is the one who is both corrupted and the protector of corruption. Also, it’s usually the ones in the ‘top’ - whether it’s in business or governance etc, who are the ones to set the rules and the very ones to break them.

Your last sentence is bang on, and it demonstrates the world we are living in now, unfortunately. I just want to cover my basis in the eventually of ‘things’ happening.

 

[Paul Kelly ICHYB]

" I just want to cover my basis in the eventually of ‘things’ happening"

Having alternaoute routes and an escape plan are your only options.

Standing and fighting your supplier without the above is a suicide mission.

 

[ArabianNights]

" I just want to cover my basis in the eventually of ‘things’ happening"

Having alternaoute routes and an escape plan are your only options.

Standing and fighting your supplier without the above is a suicide mission.

Yes of course ??

 

[MBE2017]

Had the same situation, unfortunately my supplier was the ONLY supplier on a certain product, and they took a decision to undercut all of its trade clients by selling direct.

They wanted the e-commerce business, they wanted trade clients to sell through retail shops. Despite talking too the owner, and pointing out I was selling four times his numbers, he chose to stop supplying myself. After just under a year he begged myself to buy again, he could not replicate my sales, despite selling 30% below my selling price too the public.

I politely told him where to go, most of his trade buyers had also dropped him as well, and he suffered badly as a result.

Don’t waste your time, move on, make money instead of getting into arguments.

 

[Paul Kelly ICHYB]

After just under a year he begged myself to buy again

Revenge is a dish best served cold!

 

[ArabianNights]

Had the same situation, unfortunately my supplier was the ONLY supplier on a certain product, and they took a decision to undercut all of its trade clients by selling direct.

They wanted the e-commerce business, they wanted trade clients to sell through retail shops. Despite talking too the owner, and pointing out I was selling four times his numbers, he chose to stop supplying myself. After just under a year he begged myself to buy again, he could not replicate my sales, despite selling 30% below my selling price too the public.

I politely told him where to go, most of his trade buyers had also dropped him as well, and he suffered badly as a result.

Don’t waste your time, move on, make money instead of getting into arguments.

Wow! Thank you! That’s very useful! Helps to put things into perspective. I have also just realised that my supplier is actually in the same boat more or less, as I am. Some of their own suppliers are actually ‘official’ or ‘registered’ distributors (doesn’t really have much legal bearing) who sell in retail at RRP. They obviously sell to my supplier who sell online the same products. I guess if looking at it from another perspective, they need the wholesale business, potentially more then the direct retail business - because although they seem to be doing OK, they are not great at marketing their eCommerce business. Anyways, I have other suppliers to rely on, the only issue is, similar to your issue, is that not all supplier offer a good or specific product or range. I think I’ll just continue on this course with this supplier, whilst also building relations and buying from other suppliers, so that when things go - without lack of a better phrase to mind - ‘tits up’ ? I’ll have some fallbacks. This particular supplier have a good product range and variety. That’s the issue. Always is, in these cases I guess. Thank you ?

 

[HFE Signs]

Such a common mistake - you don't have to be the cheapest to be successful - M&S charge more than Aldi.

Find your niche - specific target, specific service, customer support, quality or whatever...

Just be mindful that if you do make a success of this you could be at the mercy of your supplier, can anyone supply the goods to you?

 

[ArabianNights]

Such a common mistake - you don't have to be the cheapest to be successful - M&S charge more than Aldi.

Find your niche - specific target, specific service, customer support, quality or whatever...

Just be mindful that if you do make a success of this you could be at the mercy of your supplier, can anyone supply the goods to you?

Yes. The plan is to do exactly as you say. We will have diverse products. The plan also is of course to not be at the mercy of any one supplier, but of course building up business takes time. I guess if this particular supplier did withdraw from supplying me, I will be at a position where I will be making more money than they are and I would be able to afford to loose them, since I will have built up the niche, customer base and other supplier bases. Or maybe I am just overthinking this and the supplier sees their e-commerce operation as just a cash cow extra stream of income, as they seem to have other operations to, not including wholesale supply. The business looks to have been set up by an an IT Geek who does other things. Also, their wholesale website categorically states that they supply websites and other types of businesses. They in fact also provide APIs to allow e-commerce businesses to connect with with their databases for stock level adjustments. So, maybe their main strategy isn’t to ‘do over’ their wholesale customers and I am over thinking it.

The products are products where authenticity is always questioned, as they are big brands so although there are many suppliers out there, it’s important to deal with suppliers that offer genuine products and this particular supplier does. A lot of caution is needed in this industry. Thank you ?

 

[MBE2017]

Most suppliers main concern is people just trying to sell on price, and devaluing the brand, hence upsetting other trade clients.

Use the right price strategy and hopefully you will be ok.

 

[ArabianNights]

Most suppliers main concern is people just trying to sell on price, and devaluing the brand, hence upsetting other trade clients.

Use the right price strategy and hopefully you will be ok.

Yea, though the funny thing is though, is that this supplier is doing that very thing themselves ??

 

[MBE2017]

Yea, though the funny thing is though, is that this supplier is doing that very thing themselves ??

The difference is they can probably afford to.

 

[ArabianNights]

The difference is they can probably afford to.

The product they supply are products that they do not not hold license to distribute. They buy from the actual Distributer with who the brands have direct agreements with, at wholesale prices of course, and then reselling to other wholesale customers like me. So the one devaluing the brand I guess in this situation, is the actual distributer. And these are large well known brands. In this perspective, maybe I am over worrying.

 

[wayzgoose]

No point worrying about it, just concern yourself with your own business.
Takes me back to our B&M days when our internet sales were beginning to take off in the mid 90s. Had numerous discussions with our suppliers about selling direct to the public. One particular lava lamp maker insisted we could all sell together because they never sold at less than the RRP. Very true and would have been healthy competition - except they supplied all the lamps post free. Very annoying!

 

[ArabianNights]

No point worrying about it, just concern yourself with your own business.
Takes me back to our B&M days when our internet sales were beginning to take off in the mid 90s. Had numerous discussions with our suppliers about selling direct to the public. One particular lava lamp maker insisted we could all sell together because they never sold at less than the RRP. Very true and would have been healthy competition - except they supplied all the lamps post free. Very annoying!

Lava Lamps! Takes me back - I remember that craze ? shows my age ??? but yes, that is very reassuring. I suppose these issues are quite common in business. Thank you ?

 

[Lucan Unlordly]

Most suppliers main concern is people just trying to sell on price, and devaluing the brand, hence upsetting other trade clients.

Use the right price strategy and hopefully you will be ok.

There are exceptions..
We undercut the market quite substantially albeit within a niche sector that we have some dominance over and never get a squeak from suppliers. I bet they get a few complaints though

 

[ArabianNights]

There are exceptions..
We undercut the market quite substantially albeit within a niche sector that we have some dominance over and never get a squeak from suppliers. I bet they get a few complaints though

Does your supplier also sell directly in the same market that you do? If so, I guess that gives me some relief, as it looks like it’s more of a common practice than I am aware of.

 

[wayzgoose]

Lava Lamps! Takes me back - I remember that craze ? shows my age ??? ?

And that was the second time round for them - first in the 60s. Now I'm showing my age

 

[UKSBD]

There are exceptions..
We undercut the market quite substantially albeit within a niche sector that we have some dominance over and never get a squeak from suppliers. I bet they get a few complaints though

I was the same for a decade+ until cheap alternatives flooded the market, you could find the product on Amazon, people started selling them on Google products, another manufacturer started selling direct.

Whilst I was selling a fair quantity for just one supplier, they turned a blind eye to the fact I was selling well below their RRP.

As I was selling less and less, they sent out revised price lists more frequently and lead times grew.

When they started selling direct too, I just stopped selling the product.

 

[Lucan Unlordly]

Does your supplier also sell directly in the same market that you do? If so, I guess that gives me some relief, as it looks like it’s more of a common practice than I am aware of.

One does, and had their fingers burnt when they were selling lower than RRP and lost trade customers so they done a U turn. The others claim not to, but I'm not sure they'd turn down a big one-off order if it came their way.
Our situation is different to most I think? Lets say one of our suppliers turns over £10 million with income from one sector accounting for just £40k per annum. We'll account for £15k+ of the smaller sector. So in that sense we're a big customer that doesn't upset the wider market.

 

[ArabianNights]

And that was the second time round for them - first in the 60s. Now I'm showing my age

??

 

[SillyBill]

I don't get the concern, this is absolutely normal in most areas of business I am familiar with. We interact with several companies in all 3 capacities, as suppliers, as customers and as competitors. We each have our routes to market so far as I see it and each have our own businesses to run and all is fair in love and war. I have a manufacturing business and latterly, since 2020, I also have a company which sells direct. To offer an alternative perspective from a manufacturer (inference being the audaciousness of a manufacturer having their cake and eating it), sometimes selling direct is not a choice, when your customers are cutting each others throats, racing to the bottom against themselves and driving the whole market down with your and their margins there are cases where it is indeed better to pull the plug. In other cases where you are working with great partners who are driving value, marketing well and opening new markets you couldn't unlock yourself, including in other countries, then you obviously don't need to or want to step on toes. Times are moving, no longer it is adding value to my product(s) by getting a cheap site knocked up for a few £k and whacking stuff on Amazon/Ebay for pennies cheaper than another customer. These are the exact sort of people we don't want to work with as we can do this ourselves with better margins. They're not the partners that manufacturers make money from IME.

 

[ArabianNights]

I don't get the concern, this is absolutely normal in most areas of business I am familiar with. We interact with several companies in all 3 capacities, as suppliers, as customers and as competitors. We each have our routes to market so far as I see it and each have our own businesses to run and all is fair in love and war. I have a manufacturing business and latterly, since 2020, I also have a company which sells direct. To offer an alternative perspective from a manufacturer (inference being the audaciousness of a manufacturer having their cake and eating it), sometimes selling direct is not a choice, when your customers are cutting each others throats, racing to the bottom against themselves and driving the whole market down with your and their margins there are cases where it is indeed better to pull the plug. In other cases where you are working with great partners who are driving value, marketing well and opening new markets you couldn't unlock yourself, including in other countries, then you obviously don't need to or want to step on toes. Times are moving, no longer it is adding value to my product(s) by getting a cheap site knocked up for a few £k and whacking stuff on Amazon/Ebay for pennies cheaper than another customer. These are the exact sort of people we don't want to work with as we can do this ourselves with better margins. They're not the partners that manufacturers make money from IME.

I probably am worrying too much. Especially considering my supplier is also being supplied by a distributer who is being severely undercut by my supplier … must be the norm, I suppose ????

 

[chickenlady]

I have a number of suppliers who also sell direct - mostly at RRP under their own brand - it's usually fine until they have a sale and slash the price to the trade price. But I have one distributer for several brands who also sells direct to the public under a different name. I had been getting some stock from the EU direct from a manufacturer and that was working well until the distributer took over distribution in the UK and I was no longer 'allowed' to contact the manufacturer - the distributer was adding about 20% (initially - it is now more) to the trade price per item. I buy those products direct from another distributer in the EU now - at the same price as the manufacturer.

 

[JamaC]

* You can have an amazing marketing strategy which gives you access to more customers

* You can have better branding that is more attractive than your competition

* Your customer service could top notch resulting in many recommendations

* You can offer a more unique selection of products than your competition

* You can have the better website, providing the customers with a better experience

* You can offer the same price or you can consider more. Always remember there are customers who want cheap and some who are weary of cheap

Establish yourself as the more desirable company by improving the quality of all that you offer.

Don't see your competition as a threat. Look at them as the default then customise