How to Squash an Ant in One Easy Lesson - Or, How Big Business Steps on the Little Guy
I am going to share with you a story that has remained fresh in my now leaky memory for some 30+ years.
It is a tale of ant squashing, a true story in one of our American retail industries.
I will morph the story into the world of widgets in order to, frankly, stay out of court.
I haven't Googled "widgets" lately, but there is a product of that name in web building jargon, as we tend to capture branding for market share.
I use them all the time.
And what is easier than taking hostage of a name that has been around in proverbial terms for so long? However, I am referring to that proverbial widget and any reference to any real company or product is strictly accidental.
This story is only a parallel to a very real concept.
I am going to talk about Big Business stomping out the small-guy competitor, or, the ant...
the annoying bug.
Scene...
You are the shopper who needs a widget, as your last widget just bit the dust in a terrible accident.
It got swatted off its shelf last evening by an all-too-aggressive-would-be future hockey player.
No High-sticking in the house! Do your homework! Hey, stuff happens.
Nothing personal.
So, the search begins.
Off to the computer you go.
You find one widget locally for $89.
59.
But Willie's World of Everything has them for $59.
79! Of course! You should have looked there first! You knew that.
But the heralding would not be so dramatic if you had.
You now get the cheaper widget, but the story at the dinner table of your incredible find will prove, once again, your unequaled ability to capture the prize while preserving the family's wealth! You are amazing! Well, off to the car during lunch! Key in the ignition, AC on, adjust the mirror and...
Wait a minute.
Shut it down and sit back.
Relax and listen.
Here's the widget truth...
How it Works Joe Frank has been making widgets for fifteen years in his modest factory just outside of town.
He has fifty-seven employees and takes good care of them.
He has not had an employee turnover in six years, except for 2 retirements last year.
He runs two shifts and averages a modest 18% on his wholesale products.
He supplies some 560 stores.
Joe and his family are deeply embedded in their community.
Joe's lead salesperson just got off the phone and sits at his desk shaking.
He yells for Joe, and explains that he just landed the mother load in sales.
He explains excitedly that a buyer from Willie's World of Everything wants 7200 widgets, in 4 colors, in one month...
and if that goes OK, there's going to be more! Joe looks over the order and approves the pricing at a 16.
5% net profit.
It will mean a cut of 1.
5%, but the quantity ordered will more than make up for that.
What a break! Business has slowed a bit lately.
Joe's guy calls the buyer back and seals the deal.
The confirming fax shows up a half-hour later, and the celebration begins! Pizza for everyone!!! This has been a pursued account for 4 years!!! Word quickly spreads around town that Joe has had a big hit.
The mayor visits.
Joe gets the Key to the City! Well, the order gets completed with 2 days to spare, and Joe only had to run a 3rd shift for 2 days a week to make it.
Order shipped and payment received in 30 days! Plus, all other customers are satisfied! Good for Joe!! Joe Becomes King! A month later, Joe received a call from the buyer.
The conversation was polite, long and awesome.
The buyer apologized for cutting past the salesperson, but wants him to get credit for all business that may transpire.
The buyer asked Joe if he would be interested in becoming the #1 widget supplier for Willie's World of Everything.
Joe asserted his desire for that.
The buyer asked Joe how many widgets he could produce in 3 month's time.
Joe gave him a rough estimate.
The buyer was impressed, and told Joe they were planning a widget promotion.
They talked price, and Joe would produce and ship for a 12.
5% net profit.
Joe switched the call to his salesperson who finalized the deal.
The go-ahead was called after the fax lit up! Now running 3 shifts, seven days per week, Joe hires another 30 part-time employees to cover the shifts.
All goes well, and Joe is at the top of his game! Local hero! Good for Joe!! Joe contracts with Willie's for the next 2 years! All he can produce, seven days a week, at 9%! During the 3rd month, Joe's guy receives his quarterly call from 45 of his regular stores.
There is a problem.
Joe's guy cannot deliver at this time, as their production is tied up on a large job.
The next month 120 stores are given the same information, with all apologies.
The following month all but 40 stores are given the same message.
Joe just can't supply them until WHEN and IF he expands.
But that would take a year at best.
No problem, though, because Joe is rolling in success.
Things change in the business world and people just have to be flexible.
Nothing personal.
Now, here's what you have been waiting for...
How the Tide Turns After 2 wonderful years Joe receives a call from Willie's buyer.
Did I mention that Willie's has 355 buyers? Each one handles a different section of the merchandising world, and is highly trained in negotiation and "shaping".
They occupy one wing of corporate and are housed in rows of cubicles from which they capture the wholesale world.
They are the best! Today's conversation would be a bit tough for Joe.
The buyer explains that Joe will be their widget supplier for the next five years, but they needed to work on the price.
Joe explains that he cannot move much further, but the buyer has a different take on this subject.
The buyer says that Joe will work on a 5.
55% margin, and produce 24/7/362 days.
Thanksgiving, Christmas and New Years' Day will be holidays.
Joe balks.
He states that he cannot operate and take care of his people at that margin.
Joe explains that this would be suicide.
The buyer advises Joe that he has been watching, and Joe has no other customers.
The buyer suggests that Joe think it over and they would chat in 2 days.
Joe does not like being manipulated.
Joe immediately calls a meeting with his sales staff.
He needs them to contact all the former customers to see if they can re-kindle relationships.
The sales team of only 2 now are in shock.
They tell Joe that the former customers have made new ties with other suppliers at higher prices, but would never come back because they were thrown away by the company.
Only about 30 could possibly be restored.
They know what Joe has gotten himself into, and they are all a bit sore that their years of loyalty were thrown away for the sake of money.
It just got personal.
Joe now has to make a decision...
possibly the most important decision of his career.
Sadly, Joe called the buyer back.
He had to accept the non-negotiable 5.
55% deal in order to keep his shop open.
If Willie's pulled out, and all his old customers were gone, he would go belly up in 8 months.
Layoffs and further downsizing tactics would cripple the town and so many families.
Joe wonders what just hit him.
The buyer assured him all would be well.
They would send a full-time consultant out immediately to help with the operation.
Joe was assured that Willie's would forever be a part of his widget shop now to insure the success of the company.
Joe got a sick feeling in his gut that somehow he now works for Willie's.
Willie's bought out Joe seventeen months later for enough to keep Joe set for life.
The sale went through a satellite company of theirs and Joe went away.
Joe went far away.
The operation was later moved closer to the home office, where they were enjoying a much-reduced tax base, and much of the work was sent overseas.
Willie's was now sort of in the widget-producing business.
There is no Magic in Retail! Keep this in mind: There is no magic in retail.
In order to grossly under-sell, control must occur.
Be that control the choking of a supplier, take-over of the wholesaler, overseas moves, cheap labor, sub-standard or cheaper materials.
Big Business just can't buy like everyone else and drastically slash prices.
Something has to give.
There is no magic in retail.
What about Joe's former beloved town? Well, they will get through this, as they have for so many other now-empty buildings and store-fronts.
It's just business...
nothing personal.
Now, start your car.
Where will you buy that widget? There's a dinner conversation for you.
How will yours turn out tonight? Oh, and have a good lunch! If this story moves you, please shop & recommend your local small businesses.
The changes can begin with you.
Small steps make a journey.
It is a tale of ant squashing, a true story in one of our American retail industries.
I will morph the story into the world of widgets in order to, frankly, stay out of court.
I haven't Googled "widgets" lately, but there is a product of that name in web building jargon, as we tend to capture branding for market share.
I use them all the time.
And what is easier than taking hostage of a name that has been around in proverbial terms for so long? However, I am referring to that proverbial widget and any reference to any real company or product is strictly accidental.
This story is only a parallel to a very real concept.
I am going to talk about Big Business stomping out the small-guy competitor, or, the ant...
the annoying bug.
Scene...
You are the shopper who needs a widget, as your last widget just bit the dust in a terrible accident.
It got swatted off its shelf last evening by an all-too-aggressive-would-be future hockey player.
No High-sticking in the house! Do your homework! Hey, stuff happens.
Nothing personal.
So, the search begins.
Off to the computer you go.
You find one widget locally for $89.
59.
But Willie's World of Everything has them for $59.
79! Of course! You should have looked there first! You knew that.
But the heralding would not be so dramatic if you had.
You now get the cheaper widget, but the story at the dinner table of your incredible find will prove, once again, your unequaled ability to capture the prize while preserving the family's wealth! You are amazing! Well, off to the car during lunch! Key in the ignition, AC on, adjust the mirror and...
Wait a minute.
Shut it down and sit back.
Relax and listen.
Here's the widget truth...
How it Works Joe Frank has been making widgets for fifteen years in his modest factory just outside of town.
He has fifty-seven employees and takes good care of them.
He has not had an employee turnover in six years, except for 2 retirements last year.
He runs two shifts and averages a modest 18% on his wholesale products.
He supplies some 560 stores.
Joe and his family are deeply embedded in their community.
Joe's lead salesperson just got off the phone and sits at his desk shaking.
He yells for Joe, and explains that he just landed the mother load in sales.
He explains excitedly that a buyer from Willie's World of Everything wants 7200 widgets, in 4 colors, in one month...
and if that goes OK, there's going to be more! Joe looks over the order and approves the pricing at a 16.
5% net profit.
It will mean a cut of 1.
5%, but the quantity ordered will more than make up for that.
What a break! Business has slowed a bit lately.
Joe's guy calls the buyer back and seals the deal.
The confirming fax shows up a half-hour later, and the celebration begins! Pizza for everyone!!! This has been a pursued account for 4 years!!! Word quickly spreads around town that Joe has had a big hit.
The mayor visits.
Joe gets the Key to the City! Well, the order gets completed with 2 days to spare, and Joe only had to run a 3rd shift for 2 days a week to make it.
Order shipped and payment received in 30 days! Plus, all other customers are satisfied! Good for Joe!! Joe Becomes King! A month later, Joe received a call from the buyer.
The conversation was polite, long and awesome.
The buyer apologized for cutting past the salesperson, but wants him to get credit for all business that may transpire.
The buyer asked Joe if he would be interested in becoming the #1 widget supplier for Willie's World of Everything.
Joe asserted his desire for that.
The buyer asked Joe how many widgets he could produce in 3 month's time.
Joe gave him a rough estimate.
The buyer was impressed, and told Joe they were planning a widget promotion.
They talked price, and Joe would produce and ship for a 12.
5% net profit.
Joe switched the call to his salesperson who finalized the deal.
The go-ahead was called after the fax lit up! Now running 3 shifts, seven days per week, Joe hires another 30 part-time employees to cover the shifts.
All goes well, and Joe is at the top of his game! Local hero! Good for Joe!! Joe contracts with Willie's for the next 2 years! All he can produce, seven days a week, at 9%! During the 3rd month, Joe's guy receives his quarterly call from 45 of his regular stores.
There is a problem.
Joe's guy cannot deliver at this time, as their production is tied up on a large job.
The next month 120 stores are given the same information, with all apologies.
The following month all but 40 stores are given the same message.
Joe just can't supply them until WHEN and IF he expands.
But that would take a year at best.
No problem, though, because Joe is rolling in success.
Things change in the business world and people just have to be flexible.
Nothing personal.
Now, here's what you have been waiting for...
How the Tide Turns After 2 wonderful years Joe receives a call from Willie's buyer.
Did I mention that Willie's has 355 buyers? Each one handles a different section of the merchandising world, and is highly trained in negotiation and "shaping".
They occupy one wing of corporate and are housed in rows of cubicles from which they capture the wholesale world.
They are the best! Today's conversation would be a bit tough for Joe.
The buyer explains that Joe will be their widget supplier for the next five years, but they needed to work on the price.
Joe explains that he cannot move much further, but the buyer has a different take on this subject.
The buyer says that Joe will work on a 5.
55% margin, and produce 24/7/362 days.
Thanksgiving, Christmas and New Years' Day will be holidays.
Joe balks.
He states that he cannot operate and take care of his people at that margin.
Joe explains that this would be suicide.
The buyer advises Joe that he has been watching, and Joe has no other customers.
The buyer suggests that Joe think it over and they would chat in 2 days.
Joe does not like being manipulated.
Joe immediately calls a meeting with his sales staff.
He needs them to contact all the former customers to see if they can re-kindle relationships.
The sales team of only 2 now are in shock.
They tell Joe that the former customers have made new ties with other suppliers at higher prices, but would never come back because they were thrown away by the company.
Only about 30 could possibly be restored.
They know what Joe has gotten himself into, and they are all a bit sore that their years of loyalty were thrown away for the sake of money.
It just got personal.
Joe now has to make a decision...
possibly the most important decision of his career.
Sadly, Joe called the buyer back.
He had to accept the non-negotiable 5.
55% deal in order to keep his shop open.
If Willie's pulled out, and all his old customers were gone, he would go belly up in 8 months.
Layoffs and further downsizing tactics would cripple the town and so many families.
Joe wonders what just hit him.
The buyer assured him all would be well.
They would send a full-time consultant out immediately to help with the operation.
Joe was assured that Willie's would forever be a part of his widget shop now to insure the success of the company.
Joe got a sick feeling in his gut that somehow he now works for Willie's.
Willie's bought out Joe seventeen months later for enough to keep Joe set for life.
The sale went through a satellite company of theirs and Joe went away.
Joe went far away.
The operation was later moved closer to the home office, where they were enjoying a much-reduced tax base, and much of the work was sent overseas.
Willie's was now sort of in the widget-producing business.
There is no Magic in Retail! Keep this in mind: There is no magic in retail.
In order to grossly under-sell, control must occur.
Be that control the choking of a supplier, take-over of the wholesaler, overseas moves, cheap labor, sub-standard or cheaper materials.
Big Business just can't buy like everyone else and drastically slash prices.
Something has to give.
There is no magic in retail.
What about Joe's former beloved town? Well, they will get through this, as they have for so many other now-empty buildings and store-fronts.
It's just business...
nothing personal.
Now, start your car.
Where will you buy that widget? There's a dinner conversation for you.
How will yours turn out tonight? Oh, and have a good lunch! If this story moves you, please shop & recommend your local small businesses.
The changes can begin with you.
Small steps make a journey.