Distributor Woes

lindalouwholindalouwho Posts: 4subscriber
edited May 2007 in Sales
I figured this is the best place for this topic.
I started a publishing business and hooked up with a sales rep who works for a distributor that distributes artwork (prints, notecards, etc.) for various regional artists. She said, `gee some of the artists works would work for book covers`. I agree and contract to license some of the artist they `represent` (sell on consignment), giving the distributor exclusive distribution in my area. My terms are net 30 on product shipped to customers and a credit line of no more than $15K. The distributor handles invoicing, & takes 25% cut.
Fast forward five months - lots of sales, over $60K, most of which I`m filling or trying to fill. (way beyond $15K limit). But no payments from the distributor. Nada. Zilch. Get all sorts of excuses. computer crashed. Roof leaked, etc. etc. I ask accounting of billed, paid, etc. (I drop ship the product so I see the invoice to the customer, so I know who received product.)
I get nothing but `the checks` in the mail and we billed them this, no it was this, etc. I finally say enough. I`m terminate the agreement. They countered with - take over the billing, we`ll just be sales reps. I say OK, you did sell; I`ll pay when I`m paid by the customer. (They had also extended Net 60 to customers without /against my authorization.) But pay me for what has already been billed. I get a check for $650 from distributor (small single person owned business) - far less than what had been received by customers months ago.
I start to bill customers. No issues with customers. Some have paid, most appear not to have been invoiced. 
Then big customer cancels custom print job because of distributor badmouthing. Then two artists demand I stop publishing book with artwork. (I have an out clause for them that says they can do that.) Artists say they are being loyal to the distributor. (Distributor has many artists believing their artwork can only be used by distributor; most don`t understand licensing or that distributors agreement only states `consignment`.)
Distributor, artist and I - everyone loosing sales and $. I can get other artists, but some are well-known in area and bring in sales. I`ve already created many of these books and don`t want more to back out. (Lost time & revenue.)
Next sales rep for distributor chimes in saying she has `rights` to the books because she was the one that came up with the idea. (I had already been publishing books of this sort before she came along. She only put me in touch with the artists and sold the books on commission. I had no written agreement with her, but had agreed to pay her a `finders` fee at the end of the selling season. All copyrights are my publishing company and the artist.) I tell her because of this accounting mess and because people are canceling orders and artists are canceling books, I`m not going to pay commissions on anything if this keeps up. My frustration at the distributor simply ignoring my repeated requests and demands to follow my business practices (net 30 for example instead of net 60) has made me say things like forget it. I`m not paying anything! Of course I haven`t been paid by customers yet, so it`s hard to pay anyone anything anyway.
What would you do?
1. I could go `legal` on this distributor (small woman-owned business with indy reps) because it`s very apparent she breached our initial contract by not paying or giving accurate accounting.
2. I could just walk away and stop dealing with her entirely and sign up new artists, loosing some of the work I`ve done in the process and not getting the same `name recognition from most of these artists.
3. I could offer her a compromise and say look, I`ll pay as I initial promised the 15% and give you a bonus at the end of the year, if you bring back the artists. Let`s just move forward, etc. (I also sell these books myself and would offer exclusive distribution at this point only to customers in a geographic location. They`ve failed to sell in some key spots like hotel gift stores.)
4. Other ideas?
All the artists are somewhat `loyal` to this distributor because she got them their start in various galleries. What they don`t realize is that the art work has changed, and that this distributor isn`t working in their best interest by doing things like this, etc.Some artists have said - keep going. We`re behind you. Some haven`t said anything. I had to relay to them what happened and offer up new contracts.  
Arrggh!
I don`t want to see all my hard work go down the drain, and I admit they did great selling and don`t want to cut them out of commissions. But I also don`t want them in the middle of my business - thinking they have some claim to it just because they matched me up with artists. I`m willing to pay a finder`s fee, but not sell them my soul.
 

Comments

  • ethnicommethnicomm Posts: 1subscriber
    My first inclination is to run in the opposite direction - FAST. I don`t like to work with dishonest people (who does?) and if they are a problem now, the likelihood of them being a problem in future is greater.However, you are in a bind because the distributor is your link to greater business. It appears that they are good at the relationship part of the business but not at the critical administrative aspect. That is why they suggested you handle the billing -  they don`t have to worry about receivables. I would take over the billing but give less of a commission to the distributor as they are not bearing the risk of non-payment - you are! I would have a frank discussion with the distributor - much as you`ve laid it out here. Tell them how you feel and why. Ask them what they expect out of this relationship. Raise the issue of bad-mouthing you and how it is hurting both parties in terms of loss of potential income. I like option 3. Propose that the commissions are paid within 30 days of you getting paid by the end customer. This way they will be encouraged to source customers that pay on time and they will probably step in to help with late paying customers. Another alternative is to offer terms (example: 2% 10 days NET 30) as an early payment incentive. Build the 2% into your price - if they don`t take it, it will reduce the pi$$-off factor
    Create separate agreements for the artists you have on board. They should not be part of the arrangement with the distributor if they choose not to be.  
  • lindalouwholindalouwho Posts: 4subscriber
    I did #3 and found out they were on a rampage calling campaign to the artists encouraging them to back out.
    I just want to move forward and get this behind me. I offered them a good deal. Part of me just wants to part company because they seem wacko, fail to follow agreements and are vindictive. Another part of me realizes there`s a third party involved, so I`m trying to hang on and work it out. One friend suggested having a mediator review with both parties the agreement to ensure there`s no more `that`s not what I said`, happen. It`s me against the sales rep and her distributor boss. The sales rep concedes the distributor dropped the ball, but is also the one doing the smear campaign.
    Why she would do that when it means she`d loose sales commissions if people back out is beyond me.
    Any further words of wisdom?
  • lindalouwholindalouwho Posts: 4subscriber
    The salesperson stated she had `rights too` in regards to thinking she had some copyright ownership regarding the books. She thought just because she came up with the idea to have the artists license their work to the books, she `owned` the idea and in turn a part of the business even though she never invested, wrote or did any artwork.  
    Part is I think it was just a vindictively stupid move assumingly meant that if she wasn`t going to get paid - because I had said I wouldn`t if I couldn`t get accurate contact info - she would make sure no one got paid. The other i think is greed.
    When I first met the distributor (the salesperson works for) she went on about a relationship she had with a well-known artist who eventually asked her to leave the business and how traumatic it was. Then I find out her husband was arrested for stealing money from the baseball club and tried to pin it on the new coach because he was being outsted for medical reasons. She also told me ad nauseum about how difficult the sales person was, how difficult that person was, and a whole list of other stories about this or that thing that fell apart - all none of her fault.
    I believe they both felt they `owned` the business and routinely tried to treat me like an employee, even though they had no ownership in my business and did nothing more than sell.
    I think my mistake was not drawing clear boundaries. Every time I tried I was just ignored. The distributor has this great reputation amongst artists, many of whom simply don`t know this woman isn`t doing all she could to make them money. Her doing what`s she`s done has cost some thousands of dollars. But they seem loyal to her.
    Any thoughts? I had a written agreement they ignored. I routinely pointed to it in emails, and now I think I should just sue them for lost business and breach. 
     
  • lindalouwholindalouwho Posts: 4subscriber
    I had sent out letters and new contracts to all the artists stating that I was taking over billing/collections to make sure we could sell more books and thanking the nutcase for their great sales efforts. I sent those out the other week.
    The problem is the artists think and have been told this woman won`t `represent` them (all she is doing is consigning artwork and reselling it to galleries). Most artists think she somehow has control over their artwork, when nothing her agreement with them states the opposite. But they seem to be indebted to her.
    The problem is - the nutcase is a known entity to them. I`m not. That`s why they are pulling out of the deals.
    I think I`ll follow your advice. Not all the artists have pulled out. And some don`t want to, although I think she`s pressuring them to or she won`t represent them. But there`s more than one artist in the pond, so I think tomorrow I`ll heed your suggestion, move on, since I`ve already offered an olive branch, and just let the dust settle.
    It`s hard to feel like I`M not the nutcase, when all these artists are so loyal to her. I can see right thru it, but I don`t think they can because they`ve been `beaten into submission` by this woman.
    She has no prior judgements or issues in court with her business. So to that end...but I think she has always gotten her way because she knows how to work artists. She deals in nickels and dimes. She mainly sells notecards at like .50c a piece to gift shops. The print market is dead and she only sells a few books and is a sales rep for gift shops for two regional publishers. I don`t think she was equipped to handle this volume and I know she`s not the one I would use to go bigger. But I think she and her sales rep think they are and have dollar signs in their eyes, but keep shooting themselves down by their actions.
    Thanks for any other ideas. It`s nice to be able to at least get a second/third opinion. Any more suggestions, please offer them up.
    Yes, I do think she has slandered me. She has also breached the contract by failing to invoice customers on time and provide an accurate accounting. I don`t want to go litigious but in one aspect I want to teach them both a lesson.
  • lindalouwholindalouwho Posts: 4subscriber
    Craig,
    thanks. That really sheds light on a subject I was somewhat mystified about - why would artists act this way when it`s obvious this distributor is only acting in her own interest, not theirs. The ` kids` explanation and `fixation` element is something I didn`t really consider.
    It`s hard not to want to retaliate against the `wrong` behavior, but I need to move in that direction.
    Appreciate the perspective.
  • lindalouwholindalouwho Posts: 4subscriber
    Just an update. I got this in email today after offering them 15% on sales 2% on all sales even if they didn`t make the sale. I`d just like opinions....
    "I`m afraid that we are not interested in sales repping the books anymore.It is very sad and unfortunate the way things ended up.  I especiallyfeel bad about the XYZ project.  The only way we would want to continuewith books is with our company having total control and I am sure youwould not be interested in that."
    The xyz project she bad mouthed me on and costs a lot of artists a fair chunk of change. I`m happy she said no. I read into it that the real reason that this whole deal fell apart is because she wanted to own the product I was producing. Your thoughts?
    I`ve never heard of a distributor having full control over a product that is produced by another company.
  • ethnicommethnicomm Posts: 1subscriber
    I agree with Craig`s advice. Move on and chalk it up to experience. There is no point in extending this relationship. It appears that she has offered you a graceful out so take it. Use the reason she provided in any communication if asked - otherwise, take the higher ground, remain professional and let your actions demonstrate your character.Have you considered FINDING another distributor to help the artists get exposure? Basically helping a competitor displace the nutbar - you help the artists who seem to be dependent on the nutbar and they in turn will be more comfortable. If they`re happy, then you`re happy A distributor that wants to have full control over a product but still make a commission? That is crazy. Either you get a commission for acting as an agent of the manufacturer/supplier or you take title to the product and resell it. There is no combination of the two.
  • lindalouwholindalouwho Posts: 4subscriber
    All great advice and thank you both for shedding some `uncrazy` light on the situation. I`ve decided to take the high road as you suggest. I could sue them, but I think I`ll take the other route and contact those artists I really want to work with and plead my case with them. I think once they see the emails and lack of payment they`ll understand.
    Again, truly appreciate the comments.
  • lindalouwholindalouwho Posts: 4subscriber
    All good points.
    I did have a contract, but not a breach clause. Lesson learned. I did have a contractual agreement with the artists too, and instead of being nice when they drop out, I`m just going to enforce what`s in the contract - a 30 day business as usual clause. But now I realize I`m going to up that to 1 year.
    I`ve taken over invoicing and am beginning to receive payment from customers directly, so I think I`ll just forget about suing. There are lots of artists that have great artwork I can license. It`s unfortunate that some of the artists dropped out, but, move on.
    This was all a great learning experience and am glad it happened now instead of later. What I learned with this and in the comments you guys have offered is like a year of biz school.
    I also realize that going the legal route would have been the best route if I hadn`t taken over the invoicing and collection and couldn`t get collection from the distributor. At this point it would take up too much time and money to go after them for badmouthing. I`ll let Kharma come and get them and it will. Sales of these books will most likely be high during the summer season and I`ll let all the artists know that dropped out what the distributor did to them by forcing them to choose.
    I realize I`ve got to take the high - professional - road and not be vindicitve like they were.
    Again, thanks. All fantastic suggestions.
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