This thing has me torn. I'm going to list my thoughts, in no particular order.
First, Ed, props to you for having the stones to start and expand a small business in today's market. It isn't easy.
Second, Ed, nuts to you for making no sense. "I'm not going to tell you guys the whole story, but I'll tell other people and you can ask them." If you're going to tell the story, tell the freakin' story. You already opened the Pandora's Box, so you might as well get it all out in the open. You're not legally protecting yourself or anyone by telling some people and not telling others; all you're doing is trying to limit how far it goes. Ain't gonna work.
Third, I'm guessing this is a distributor's agreement where they're trying to protect a customer who existed before you came along. I'm familiar with C&B and L D Carlson and all that. My own business (
www.reconstructinghistory.com) has agreements both up the chain - for stuff we retail - and down the chain - for stuff we produce and wholesale. I perfectly understand the distributor's side of it, and support it. The distributor has an established customer base he wishes to protect. Moreover, if he
did allow complete free-market capitalism to take effect, not only would that negatively impact his established customer, there's every chance that both retailers, old and new, would go out of business, burned out in the battle for market share. Distributors aren't willing ro risk that.
Does that sometimes suck? Hell, yeah. Does it make sense? Also hell, yeah. In fact, the agreement I
think is in effect - because Ed will tell some people, but not make it completely public - makes sense for the distributor. The established customer has a brick-and-mortar store and doesn't want to fiddle with an online presence. The new customer proposes online only. That's a match made in heaven, because it exploits two niches simultaneously. But you
do want to protect your long-established customer, so you write up some language that protects him.
In this market, if you want to retail you have to deal with wholesale agreements. One of my suppliers has a clause that says there's no minimum order amount. There's another clause that says I must order $3000 worth of stuff per year. We make our retailers pay a big order up front and minimums thereafter, and we don't offer net 30. We also pay attention to who sells where, because it
always turns into a problem when two retailers sell the same stuff too close. It
always devolves into a price war, and that's a war no one can win.
Look at petrol stations right across the road from one another: It becomes a spiral of lower prices and free stuff and free services until one of them folds and the 'winner' gets to jack the prices and nix the freebies. That's free-market economics, all right, but it doesn't do me any good, because I as a wholesaler just stopped making money - neither party, towards the end, can afford to buy my products. It gets worse! Now the market expects my products to be sold at a lower price point, driving down the retail price across the board; the original MSRP was $15, but they've been getting it so long for $10 that they're not going to pay $15 anymore. My retailers have to make money, so in order to move SKUs I have to reduce the wholesale prices, which cuts into
my bottom line. Screw that! If that means I have to resort to territorial wholesale agreements, so what? It's good for me, it's good for business.
All this is to note that if the distributor says "no competition within 25 miles unless the population density exceeds XXX", there's a very good reason. It means that both competitors generally fail. That hurts the distributor
as well as the consumer. Because the consumer goes from a surfeit of sources to no source at all for the distributor's goods. From the supply side, that's a complete no brainer.
Anyway, Ed, I wish you all the success in the world! Small business is the backbone upon which this economy runs, and your being successful means we're
all successful!
Cheers,
Bob