Retailers Need to Offer Trade Advantage to Minority Suppliers
Albertson’s recently announced a new program to boost the presence of minority suppliers on its shelves. It appears to be a combination of onboarding assistance via RangeMe AND access to below-market interest rate short-term working capital loans.
By offering cheap loans, primarily, is a retailer solving the right problem when it comes to equity?
It’s true that the inability to cover fixed operating costs early on is a significant contributor to flaming out, regardless of the product concept. So, working capital would get minority founders a leg up in pushing through the Death Funnel, as I playfully term it. Minority founders I’ve encountered tend to be much more careful with money and have seed money in place when they start, albeit not much. I would bet they do better than the average money naive upper-middle-class white founder who grew up in privilege.
The real challenges for minority founders come when they need to raise substantial funds to cover slotting, marketing, and other costs related to significant growth once they’ve hit $1M in trailing sales.
In my book’s parlance, it’s the growth from Phase 2 to Phase 3, particularly where minority suppliers need a leg up, affirmative trade action. And they’re not getting it from any major chain.
Mentoring, coaching, and induction into retailer incubators is nice PR. But, most of these tiny startups fail for other fundamental reasons than lack of working capital.
If retailers are not offering up offer free end caps, waiving onboarding fees, assigning extra facings, or offering real trade advantage in the store to minority founders, they’re not leveling the playing field much. Some working capital when the business is at $300,000 may help it survive but won’t help it with advantaged visibility. Something that would stimulate growth.
And as anyone in finance will tell you, revenue growth solves most cash flow problems (including the servicing of debt).