One Huge, Dominant Customer – Why You Don’t Do It
A major rule of doing business is there shouldn’t be too much reliance on any one customer to generate revenue growth and profits because it just takes one decision by that customer to crush the business.
That recently happened with a company called Bossa Nova, a robotics company that supplied Wal-Mart (WMT) with the robots it was using to help take inventory.
In response to Wal-Mart’s decision, the company had to lay off about half of its staff. Now it’s scrambling to find new businesses to sell their inventory robots to.
The problem with that, beyond the obvious big hit it took, is that it is now in a weakened position that puts any business interested in their inventory robots in a superior position to negotiate better terms.
In a Wall Street Journal article, someone familiar with the situation said Wal-Mart stated this to Bossa Nova:
We see an improvement in stores with the robots. but we don’t see enough of an improvement.
Bossa Nova was a startup launched from Carnegie Mellon University. You would think they would have known better.
It’s understandable for a business to take on a big customer if it does so from the launch of the business, but it appears the demands of Wal-Mart brought about the lack of time and resources to drum up more business.
Anyone that is overly reliant on one customer is one quick decision away from disaster. As quickly as businesses can they should expand their client base.