STEP 1: IDENTIFY THE ISSUE Failing to identify and properly handle a serious shortcoming in wholesaler performance can have serious ramifications for your business. On the other hand, exaggerating the significance of a small problem can lead to overreactions, which often only exacerbate the underlying issues. Prematurely threatening termination or a lawsuit can backfire, with terrible results. Hence, the first task at hand is to categorize the issue properly, and thereby to calibrate its seriousness and the range of appropriate solutions. Consider the following list of examples:
DIFFICULTIES AND DISPUTES WITH WHOLESALERS
A BRIEF STEP-BY-STEP PRIMER TO DEALING WITH THE INEVITABLE
BY DANIEL P. MCGUIRE
s a craft distiller, you have likely encountered difficulties related to wholesaler performance in the past, and will likely do so again in the future. These difficulties can be major or minor, and can include such travails as temporary dips in sales numbers, persistent failures to reach contractually agreed-upon targets, and even breaches of contract or applicable law (such as failure to restrict sales to an appointed territory). Handling these problems correctly when they arise could be a crucial factor in the long-term success of your business. Importantly, both state law and the language of your distribution agreement will often circumscribe the options open to you. While each set of facts is different, and there is no one-size-fits-all formula, what follows is a flexible step-by-step guide for contextualizing wholesaler difficulties properly, and handling them constructively within the confines of law and contract. WWW.ART ISANSP IRITMAG.COM
When reviewing monthly reports, you notice fluctuations in sales numbers that do not appear to correspond to the wholesaler orders.
A period of growth in a new market is followed by three months of declining sales and a corresponding drop-off in orders.
You learn of products being sold in a territory where no wholesaler has been appointed, and while you suspect transshipping the wholesaler denies any knowledge. A large national wholesaler refuses to participate in co-marketing programs.
You become concerned that the wholesaler does not employ sufficient staff dedicated to the promotion of craft brands.
After a period of no orders, you reach out to the wholesaler only to find that the wholesaler fails to return your telephone calls or emails.
You sign a written contract with a wholesaler who then “sits on” your brand, refusing to place orders for products or placing only minimal orders.
A wholesaler with whom you do not have a written agreement, and which has never placed an order, claims the exclusive legal right to distribute your products in an entire state. You are not quite sure what they mean when they threaten to “take actions to defend their legal rights.”
You learn that a wholesaler has been recommending that retailers place orders for competing brands, and you suspect that the wholesaler may be disparaging your own.
Naturally, each of these scenarios represents a qualitatively different kind of problem, and the appropriate remedy will differ accordingly.
STEP 2: IDENTIFY YOUR OBJECTIVE The second task is to identify your desired outcome. In light of the issue you have identified, what is your goal for resolution? Defining the desired outcome will inform your practical approach to the issue. It may be helpful to prepare a short written summary of your objective. This will (i) enable you to clarify your own next steps; and (ii) facilitate constructive communications with the wholesaler as to how they can solve the problem you have identified in step 1. Examples:
I want the wholesaler to redouble sales efforts, and thus to recover lost market share. I want the wholesaler to support local marketing programs and targeted promotions, to provide pricing support if permitted, etc.
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