How I survived when my key supplier dropped out

Nicole Kersh founded information technology and telco equipment supplier 4Cabling after working in her parent’s IT company and found wholesalers weren’t quick enough to provide the speedy service she needed.

Since then the company has enjoyed impressive growth with revenue of $5.2 million. But it hit a massive roadblock when a key supplier terminated its relationship, and Kersh was forced to find alternative means of survival.

How’s the business going? Does it get busy this time of year?

We’re actually busy all year round; bad because we’re always tired but good because its constant, which is what you want.

So give some background on your issue with this supplier.

When we started, we weren’t so keen to purchase directly from the factory in China because we couldn’t make the minimum order and we were a bit hesitant in terms of taking that leap. So we had quite a long-standing relationship with this supplier.

I’d actually known them from my role in a previous job so the account carried on and came with me, and the key is they have two business models – they sell direct to wholesalers and distributors.

And some of those found you as well?

They don’t have a good job of differentiating price very well. We’re an online company and we can’t control who finds us, so it just so happens we were selling a product of theirs which was very visibly branded; cheaper than what they were selling to wholesalers.

That didn’t go down very well.

How did you find out the relationship wasn’t going well?

It was actually from one of their customers who had been buying this item from them at an inflated price. They were much, much larger than we were – a national retail chain. So they basically called the supplier and put an ultimatum on them and said, us or them. And it was them.

How did that conversation between yourself and the other company happen?

Anyone would have done the same thing. So it was actually a conference call between all the parties. It was made very clear that that’s it, they were coming to get the rest of their stock.

Was there any room to negotiate?

Not one iota. I think they had a point to prove where they needed to protect themselves because it appears they weren’t looking after their customer base very well. So I think for them it was about principle, there was no, “let’s talk about this”, or anything, it was just they were so adamant to not have our business.

We had a lot of outstanding orders at the time, in the morning we had a supplier and in the afternoon we didn’t.

That would have been a major shock for you.

It was, though it was the best thing that ever happened to us.

Could you explain why?

We went from having no control of our stock, pricing and market position to being completely in control over where we wanted to position ourselves price-wise, and then we had more competition. So we now knew who our direct competitor was, whereas before, they were our supplier. In the same way, they went from having a customer, to a competitor.

When this all happened, how did you react? What was your first reaction?

Thankfully we had a back-up supplier so it wasn’t as traumatic as it could have been, because we were quite cautious about not putting all our eggs in one basket. We did lose money because the margins weren’t there, so we sent our orders at no mark up until we were ready to air freight in.

We’ve never looked back.

Did you learn anything from your previous relationship that you took into your new one?

We were a lot more transparent about it all. We’re still using this supplier, we have a great relationship with them, we’ve lost quite a few sales to it but at the end of the day he’ll be there no matter what happens and vice versa, so it’s definitely as transparent as possible.

Did you ever fear for the future of the business?

At first, it was such a blow because we were just starting to gain momentum in our business, and we didn’t really realise, you just don’t see that happening, and there definitely were moments where it was, “what am I going to do?” Am I going to explain to these customers? It wasn’t even anything that was in my control. So definitely.

But looking back I think that it actually couldn’t have happened in a better way.

For other businesses that feel threatened by suppliers, or are in a bind, what would you recommend?

Forecast your stock so you know what you need to have, so if you run out, you have a reserve to do your orders. Make yourself a little bit less reliant on things that are out of your control.

I think a lot of it has to do with cashflow if you’re starting up, and if you don’t have a sales history to back-up your forecasting and things like that. You just need to ask your supplier what a popular product is, and things like that so that you know, in which direction to try and push.