designer toolkit | Mar 27, 2024 |
How to protect yourself against vendor shutdowns

Last long enough in the design business, and you’ll see it happen: A once-trusted vendor hits a rough patch, starts falling behind, and suddenly shutters. It can occur because of a recession, gross mismanagement or sheer bad luck. But whatever the reason, when a merchant encounters difficulties, it can cause serious problems for designers with open orders.

When a vendor shuts down or goes bankrupt unexpectedly, your options get narrow fast. But if you can stay a step ahead, it’s possible to minimize—or even avoid—the disruption. Here are a few simple suggestions for protecting yourself and your clients.

Vet Online
The reality: No designer Googles a vendor every single time they place an order. But it is good practice, particularly when purchasing from a new company, to do a quick search for bad reviews or potential issues. That’s especially true if you spot any preliminary warning signs, like a business advertising a product as in stock when it’s on back order everywhere else, or an Instagram account with comments turned off, which can be a sign of an attempt to stifle consumer complaints.

If you want to do a deeper dive into a vendor, there are plenty of resources. Trustpilot, the Better Business Bureau, Google and Houzz all aggregate consumer feedback (designers post reviews too). Glassdoor allows you to search employee reviews. Pacer lets you look for lawsuits. Then there are services that provide credit and background checks. But in most cases, the red flags are right there on the first search page. Make a point of vetting if there’s any trace of doubt about a vendor.

Use a Credit Card
The simplest way to protect yourself against vendor issues is by paying with a credit card. You can dispute a charge on a debit card, but they don’t have the same consumer protection requirements that credit cards do. (Paying with a check or via ACH, meanwhile, is akin to using cash—once the payment is processed, there’s not much you can do, and the bank doesn’t have an obligation to give you a chargeback if the merchant doesn’t issue a refund.)

For credit card payments, you generally have 60 days from the issuing of the billing statement in which to dispute a charge, but American Express, Visa and Mastercard allow for chargeback requests up to 120 days from the purchase date. Some credit card companies will work with customers outside of that window if the goods were never received or were delivered after the dispute deadline. Anecdotally, many designers say they prefer working with Amex, as the company is both an issuing bank and a credit card network, making its processes more streamlined than competitors that work with third-party banks.

The Federal Trade Commission recommends providing as much documentation as possible with any chargeback request, including the order confirmation and any interactions about a delivery date or delays—so, make a practice of getting communications with vendors in writing.

Credit card companies often want proof that you’ve tried to get a refund from the merchant before they’ll issue a chargeback, but that isn’t always an option if the company shutters overnight. The main reasons the claim would be denied are if it is made outside the dispute window or if there is insufficient evidence to back it up. Again, the more information you can provide, the better your chances of getting that money back.

Get Your Contract Right
The sudden shutdown of a vendor creates an instant dilemma: Who’s going to shoulder the cost of an order that never arrives? Your design firm may choose to cover the loss, but it’s wise to include a policy in your contract so that you have additional protection and the freedom to decide.

Business coach Sean Low recommends examining your fee structure to determine whether you’ll adjust for replacement items, including a markup policy and additional sourcing time. (Some firms offer half their billable hourly rate for time spent sourcing a replacement, or the full rate after a set number of no-charge hours. Others may waive a markup on the replacement item.)

Stay Connected
The best source of information—especially about to-the-trade sources—is often other designers. There are plenty of reasons to develop a network of peers in your community; being able to ask another designer, “Hey, have you heard anything about this millworker?” is a vital one. Developing relationships with salespeople is equally crucial. Even if a vendor is struggling and employees are attempting to put on a brave face, reps are human. If they can, many will go out of their way to help friends in the trade avoid catastrophe—sometimes at their own financial expense. Relationships matter.

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