Some years ago I visited a friend of my Dad’s at his office. It was sterile – there were no pictures, very few papers on the desk, little in the way of files or anything else that looked like normal business activity. It looked like one of those rent-a-suites that has no life in it.  Since he was a long-time family friend, I was like, “Hey Arby, what’s with the office?”  “Wal-Mart’s over 80% of our business now. When they pull the plug we’re wrapping it up.”

Now this was a company that had been in business for about 50 years. To give you an idea of the longevity of the company and Arby’s position, it was my father who actually got him the job – in 1962.  Dad was actually working for the boss, Irv, at the time, but had decided to join the Army. Since he didn’t want to leave the guy flat, he decided to provide Arby in his stead. The story goes that Dad told Irv, like, the day before he was leaving. So it’s a funny anecdote, and Arby worked there in some capacity for close to 40 years. He eventually came to run the place, and I believe, had an ownership stake.  He was now sitting around just waiting for one customer to pull the plug.

You may have heard of the ways Wal-Mart puts suppliers out of business. First, they become their majority customer, forcing them into a vassal state. Then they either ask for unmeetable prices, or tell them they can’t pay on time, or cancel an order. And the company is done.  Arby’s company went out of business in that manner, but they had a long and lucrative ride.

In the book business, I consider a Wal-Mart problem to be when you have one supplier that is responsible for 80% of your inventory. If that supplier closes down, or raises the price or refuses to sell to you, you’re done. If you don’t have enough runway to last long enough before you can line up another supplier, let me repeat, you’re done.  It’s basically a vigilance issue. If you have a Wal-Mart problem, you have to take the extra time necessary to find new suppliers, new sources of inventory, and keep them alive, even as you are enjoying the fruits of your major supplier. If you even think you might have a Wal-Mart problem, you have a Wal-Mart problem and have to find new sources of inventory.

Besides being just good business sense, protecting your flank, there are at least two other benefits I can think of to constantly looking for new suppliers:

• First, any thing you can do to get out of your comfort zone, meet new people and come to understand the used-goods ecosystem, the better. Meeting new people and going into new situations is often uncomfortable, but people are the bridge to learning new things. And the more you know, the more money you can make.
• Second, when someone or some business is responsible for 80% of your business, they instinctively know they have you by the balls. They don’t need to have them in a jar behind their desk. By creating multiple sources of inventory you are sending an equally concrete message – I appreciate your business, but you don’t own me.

Guest post by: Frank Giovinazzi

Adam’s note:  This post by Frank backs up one of the biggest pieces of advice that I preach about.  If you want to make $100/month then head over to the thrift stores once a week and make a few bucks on each book you buy.  If you want to make $10,000/month or more  you have to forget talking to the clerk at the check-out counter and set your sights higher in the office.  Be sure to sign up for my email list at the sidebar on the left to get immediate notification of my near-completed inventory sourcing eBook.  It finally reveals every source I’ve ever used and gives you many ideas for unconventional sources for you to use also.

The Wal-Mart Problem: 1 Source, 1 Death [ 4:48 ] Play Now | Play in Popup | Download (55)