I stared at the email and fumed. What do you mean we lost the business?
This wasn’t driven by pride or ego. We HAD given them our best price, quoting a pricing level where we should have been assured of victory. This proposal was at break-even pricing to protect other business in the account. On a generic spec, commodity grade product. Where we had the lowest cost in the wholesale industry. (I was very sure of that, since I had personally negotiated that deal).
And we had just… been owned. Not merely losing the business, but getting buried.
I picked up the phone and called our sales representative. The street intelligence process hummed. We learned we had lost the business to a food distributor. Taking the business just above their product cost using a “paid for” truck. A few pallets of prime rib for the buffet generated enough margin to cover the delivery cost of the run. They were able to ship our product for free!
It turns out, this particular competitor was actually a bigger threat than another toilet paper merchant. The janitorial supplies distributor would have had similar costs, requiring similar margins. To the restaurant distributor, our business was “gravy”: pure profit on a paid for truck.
We got run over by a “paid for” truck – any margin they won was basically pure profit…
Looking past selling toilet paper, you see this same risk in many other industries. Amazon has leveraged their demand to pivot into cloud servers (AWS) and logistics (FBA). Their existing scale let them enter the space with an immediate cost advantage.
Your most effective future competitor is probably lurking in adjacency…