For Subscribers

Catch-22

Are small companies that buy from giant retailers sleeping with the enemy?

By Joshua Kurlantzick • May 5, 2006 Originally published Sep 9, 2003

Opinions expressed by Entrepreneur contributors are their own.

Already squeezed on all sides by a weak economy, the slowdown inconsumer spending, and the rising costs of health insurance andother services, small retailers face another challenge. Themegastores--Sam's Club, Target, Wal-Mart and others--thatcompete with small retailers have increasingly becomeentrepreneurs' main suppliers, putting many small storescompletely under the thumb of the giants.

Entrepreneurs like convenience store owners have always sourcedsome products from larger stores. "Small shops used to getsome of their goods from Sears in the 1930s. The owner would buyitems, send his aunt and uncle in to buy more items and resell themat his store," says Eugene Fram, a marketing professor at theRochester Institute of Technology in Rochester, New York. Recently,the trend has become more pronounced, as megastores have targetedsmall-business clients and used economies of scale to undercutwholesalers that historically supplied small companies. At the sametime, major suppliers have required small companies to placeminimum orders, pushing even more entrepreneurs into the arms ofmegastores. Gabriel Vega, owner of The Name of the Game, a toystore in Camarillo, California, can't afford to spend $5,000 atone time-the minimum order major toy companies often require. SoVega buys toys at local megastores and resells them in hisshop.

Continue reading this article — and all of our other premium content with Entrepreneur+

For just $5, you can get unlimited access to all Entrepreneur’s premium content. You’ll find:

  • Digestible insight on how to be a better entrepreneur and leader
  • Lessons for starting and growing a business from our expert network of CEOs and founders
  • Meaningful content to help you make sharper decisions
  • Business and life hacks to help you stay ahead of the curve

Related Topics

Editor's Pick

This Co-Founder Was Kicked Out of Retailers for Pitching a 'Taboo' Beauty Product. Now, Her Multi-Million-Dollar Company Sells It for More Than $20 an Ounce.
Have You Ever Obsessed Over 'What If'? According to Scientists, You Don't Actually Know What Would Have Fixed Everything.
Most People Don't Know These 2 Things Are Resume Red Flags. A Career Expert Reveals How to Work Around Them.
Business News

Massive Fire At Top Egg Farm Leaves Estimated 100,000 Hens Dead. What Does This Mean For Egg Prices?

Hillandale Farms in Bozrah, Connecticut went up in flames on Saturday in an incident that is still under investigation.

Growing a Business

Determined to Support the Black Community, These Friends Brought 'Fresh Eyes' — and Innovation — to the Food Industry

Carmen Dianne and Kara Still co-founded Prosperity Market in 2020 to battle economic instability and food insecurity in their local communities.

Social Media

You're Not Shadowbanned — Your Content Just Sucks. That's Why It's Time to Change Your Approach.

As an influencer manager, I often hear clients complain about their content or account being shadowbanned. But to be brutally honest, most of the time, it's not the algorithm that's the problem — it's the content itself.

Business News

OpenAI Rolls Out New Feature to Help Teachers Crack Down on ChatGPT Cheating — But Admit the Tool Is 'Imperfect'

Amid increasing concern regarding the use of ChatGPT by students, the tool's creator has announced a new feature that could help teachers spot it in academic context.

Life Hacks

Start Composting with This CES-Featured Device

Help reduce your carbon footprint with this handy composter.