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Comment by asah | Hacker News Reader

It's 101 that wholesale buyers order by the case and for producers to specify the casecount and price, and for errors like this to be caught when the prices/etc don't line up. This is equivalent to not knowing that URLs can redirect, or that http:// and https:// aren't the same thing. Distributors work with 1000 brands each and don't have time (or margin) to babysit.

Also, when a company gets a much larger and different customer, I would expect any CEO to pickup the phone and talk with peers about how to manage the process. Brokers are outsourced commissioned reps, not shareholders.

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A brokers main job is to get the deal done. But ostensibly they’re also there to advise and build trust. It’s easier to be a broker if people like working with you and refer you.

It sounds like the broker made a mistake on the point around payment terms.

I do agree the confusion on “units” should’ve been caught by the roasters, given order $ amount.

Multiple mistakes actually.

Or optimistically, multiple lessons learned.

> It's 101 that wholesale buyers order by the case and for producers to specify the casecount and price,

Not sure why you're being downvoted because thats standard in wolesale. Not sure how they couldn't catch that when looking at the price either.

Maybe they thought they'd sell a lot less for the same price and aren't talking about this?

Reading their description, there is no real point in which anyone takes real ownership of this mistake and so something like this is probably likely to catch them again.

Did the consultant drop the ball? Yes, but so did they, in a pretty big way.

Still, I've run businesses and when you're trying to bootstrap without experience this kind of thing does happen.

If you are unsure to what extent you can or cannot depend on the consultant, you might as well do all the work yourself at that point. They cannot add value to the process; they could have not paid the consultant and worked directly with the grocery distributor.

The addition of the consultant led to a delegative mindset ("I'm paying someone to handle that problem") that ultimately didn't pan out for them.

>The addition of the consultant led to a delegative mindset

That's it right there. I've rarely, if ever, seen that work out well honestly. The consultant has no real skin in the game and so you still always should be doing your due-diligence. They're there to help rapidly guide you to competency, but they won't do that work for you, you really need to be an active participant.

I like this line of thinking; if you're already down to that level of granularity, a consultant won't help you.

I don't understand either.

They sell for 50% off right now for 42 a case, meaning normal price was 84. 84 × 6000 = 504 000

This doesn't add up with the 250k they were hoping for and the 50% off. Or am I wrong? (too bad they only have decaf yet, wouldn't have minded to try.)

Assumigly, they're offering I'm the coffee for 50% retail price. Sounds like that would put everything in line with standard grocery store markups.

https://bellwethercoffee.com/blog/how-to-start-selling-whole....

ah so that makes sense

Wholesale is usually 50% or less of retail price.

Any retailer hopes to make 30%. 50% would be pretty incredible.

Go get a product put in a big box and let me know what % margin you are keeping

The confusion here is that different types of items have different margins. but grocery is typically 30%, as is hardware / lumber. However coffee itself might be a profit center for grocery stores, and they might make a bit higher on it. Items like gifts are 50-55%, and clothes more like 70% markup.

Amazon routinely takes over 30%, especially if FBA.

Normal retail price. They were probably hoping to wholesale it for 42 per case, which is what they’re selling it for now.

Yeah so begging for help and everyone shows up to help but they’re still trying to take profit on the entire thing. Honestly nice work, They pulled it off. If I were in that position I would have cut the price to the bare COGs. Feels wrong to beg for help while secretly profiting off your rescuers.

Respectfully, people getting a "50% off retail value" deal on a product are not what most would simply call "rescuers". They are people who got a stellar deal and maybe got a good feel or two that they wouldn't normally have

I work in wholesale, but a different industry (electrical) and this is 100% wrong from my experience. Varies from business to business but often times our POs go out for single units rather than cases. It's actually a huge headache for us as we can't get the team responsible to keep our ERP system up to date on which units to use for which lines.

yep. Sadly, the food industry is different and in fact you see big variations across the trade, both in how buyers, sellers, brokers and distributors work.

I grew up in a piping wholesale business in the midwest that's still going after 35 years. Orders could be ea. (each, single part) or cs. (case, which is arbitrary based on supplier). That industry is never arbitrary unit (e.g. per "units")because the suppliers sell in bulk and piecemeal, and buyers all have their own specs for how they order.

So I can confirm that at least one other wholesale market is indeed different.

I've seen the same with snack foods. Never saw "unit". A single was an each and it would be said like, "$2 per each" rather than most people would say, "$2 each". I can't remember what the bundle name was case...or something, but it wasn't unit.

It’s a lot more clear if you use EDI to transact with trading partners

What’s the best resource for learning about EDI?

Not necessarily. Wrong price on a PO is wrong price on a PO, electronically or not. A human set it up in the system.

The situation seems to be that they thought the total order over time would be 6,000 "units" (and I've always seen "unit" as equivalent to "retail item," not case or casepack), not that the orders weren't being submitted per-case.

In other words, the issue isn't that they were selling entire cases at a wholesale unit price; the contract probably stated something like pricing of "$x/case, 6 units per case," but the issue was that a noncontractual, oral term of "6,000 cases" was conveyed as "6,000 units," leading the company to assume they had the cashflow and resources to handle that scale of order. It wasn't, and they didn't. As a result, they went negative free cashflow because they weren't prepared for the capital outlay, payment terms were subject to the entire order being fulfilled (which was 6x larger than they expected), and then the order was entirely cancelled with no recourse or break fee.

So it seems to basically have been a perfect storm of a very small, retail roaster with very limited wholesale experience signing a contract for a single deal that was far larger than they could financially handle, having to take on a bunch of high-interest and friends-and-family debt to cover the costs of fulfilling the contract, then the contract allowing a unilateral out on the part of the resale broker with no recourse for the roasters. It's not the first time I've seen a company get stranded at the growth inflection point with insufficient cash or credit to get over the hump. Looks like they might survive this learning experience, and hopefully will be a lot more cautious about growth opportunities in the future. And it might serve as a cautionary tale for some folks on this site who could find themselves in a similar situation, taking on more growth than their business can operationally or financially support.

> when the prices/etc don't line up

Actually, that does have me confused as to how this could happen. Was the coffee quoted per case or per bag? And when the order came in per "unit", how did they not notice that price was 6x higher than it should have been?

I think gp comment is saying that the coffee roaster believed they were selling it at $x/bag. But the acquirer thought they were paying $x/case, which looked very very cheap so they ordered 6000 units of it.

Honestly pretty amazing that this issue could be unnoticed and grow to this degree. I guess that’s the power of wishful thinking. Obv the distributor isn’t putting much thought into this, but the small business owner certainly did.

The word unit alone begs the question, what is a unit? I wondered myself reading it the first time in their article, before I knew it was going to be a land mine of their situation. I never read how they got “grifted”. This is just very poor business management, except they managed to sell it all online with this story which is impressive.

You would expect the consultant to explain this to the small business owner, who isn't the SME.

sigh, I know. But food brokers are outsourced commissioned reps and not strategic thinking shareholders. Food brokering is a tough business and many are (shall we say) not that great, and very few think strategically.

(I do know some great ones, btw)

> I would expect any CEO to pickup the phone and talk with peers about how to manage the process.

The "Think Different" mentality. I think there are too many CEOs who are only CEOs because they refuse to take advice from others. In this case, all they had to do was literally have a single person on the staff with some experience.

It's a small operation. I doubt they could afford someone on staff for this and similar responsibilities. That's likely why they went with the food broker, expecting that person to consult with them. Many of these people don't work with startups, though, so they're mostly there as rubber-stamp folks and connectors, and can't help consult.

I doubt this is some "I know better" mistake. It's an "I don't know what to do here and I asked someone I think would know but because I don't know, I didn't know how to select that person to ask either" mistake.

“The distributor made a mistake and overestimated the needs of the major retailer and the deal was off.”

It wasn’t that the order was too big; it was indeed that the middle-man screwed up. There’s no evidence that had they done more due diligence that they could have avoided the issue. Supply chain has had lots of unexpected waves since COVID anyways.

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