A card company paying cash for card space says a lot about their business
Greeting card suppliers are back at retailer doors offering cash for wall space.
Before you sign, understand exactly what you are agreeing to.
I don’t get it, I really don’t.
What does it say about the card company that they have to give a retailer cash to buy their business. I would have thought that the retailer and the card company would make more money if the cards were the best and backed by the best service. A bag of cash takes consideration away from product. maybe that’s what they want.
The offers I am hearing of are big. Fifty thousand dollars. One hundred thousand. Sometimes three hundred thousand. The old structure was an interest free loan, repaid through rebates on card sales. More recent deals leave the rebate untouched and require the retailer to repay the cash on top.
Either way, the deal is the same. The supplier is not investing in your business. They are renting your wall. And you are the one carrying the debt.
It doesn’t make sense to me.
When choosing a card supplier you need to choose based on revenue for the business from cards, and what else happy card shoppers will buy in your business.
A card company should earn its space through sell-through. Once money enters the deal, performance stops being the measure. You stop asking which cards sell and start planning what the cash will pay for. That is exactly what the supplier wants.
The evidence is clear. We have seen a business where one supplier held the entire card wall. Splitting the wall fifty fifty delivered immediate double digit growth. A later supplier change lifted sales again. Competition and range drove those results. No cheque did.
One newsagent with multiple stores took around three hundred and fifty thousand dollars from a card company and later collapsed, leaving the supplier out of pocket. I wonder if retailers ended up paying for this?
Plenty of retailers are unhappy with their card company and cannot leave. The debt locks them in.
The cash is not free. You pay for it in weaker card sales and lost freedom to change suppliers. If a card company wants your wall, make them earn it with product that sells.
If a card company offers you cash up front for a commitment, pause. Sure, the cash would come in handy. The question has to be – over the lifetime of the contract, what is the real cost of the cash I might get today? Also ask: how bad are their products that they need to buy my business?