How to toss $25,000 away without really trying

A company I know a little about has recently had an identity crisis. You see they are the manufacturers/distributors of sporting clothes. They have the product manufactured by a contractor and distribute it out to their retailers.

But like many distributors, they became frustrated at the perceived lack of support of their product by the retailers. And the retailers were taking a whopping margin for very little work (in their eyes anyway).

So the manufacturer/distributor had a bright idea (insert light bulb here!).

“Why don’t we sell direct to the public and stop supplying the retailers!”

Excellent thinking. Not.

Here’s what happened.

Step 1: Retailers drop product. Cash flow stops.
Step 2: They set up a system to sell direct to the public. This is limited to internet/fax/phone orders.
Step 3: Took infommercial style ads on a national morning TV show (spots were $7,000 each – they took 2, creative and production were close to $8,000, set up of phone order taking company for the expected deluge – $3,000).
Step 4: Wait for huge order numbers.
Step 5: Keep waiting.
Step 6: Think to self “Ooooops, what have we done?”

I know what you are thinking……………for the record they sold 200 products. Margin was $8 per product. That’s a loss of $23,400.

You can’t be all things to all people. It is very, very difficult to set up the infrastructure to be a distributor of products. It is very, very difficult to be a national retailer (especially without any experience).

Stick with what you know best and focus on that.