I was told two different stories today about large companies that sold products to smaller business to resell where in the end the smaller companies ended up growing bigger than them. Afterwards, they simply stopped doing business with them as the bigger company was now able to acquire products on its own. It basically hurt their business and as well they helped to create an industry giant.
The situation was pretty typical of one that I heard before about a contact lens company. They started selling contact lenses with much success. Since they purchased products in such large volumes, there was a smaller company that wanted to buy the products from them to resell as they couldn’t exactly afford to purchase in bulk. It seemed like a win-win to them as they are essentially increasing their sales by selling to the other business.
I guess they got way too comfortable with this extra source of income as financially they seemed to be doing so well. However, while they were sitting around and not doing anything different the other company started to do things such as create an e-commerce shopping site which generate more business. This meant they had to buy more from them and of course if you were them you would think even better as that means more money for you anyways.
Course, the day came where they became so big that they simply branched out. So the original company lost that large chunk of income as well as the market share. Unless you are selling something so unique that people must come to you, I suppose this is an example on how if you make extra income in this fashion where you sell it to other businesses to resell that you have to always focus more on growing your business through your own efforts. Otherwise like that you will tend to get lazy when it comes to innovating as the numbers are just deceptive where since you made more everything must be fine.