Critics of visionaries and entrepreneurs often quote an old saying, “Pioneer, disappear.” Others say “You can tell who the pioneers are. They are the ones with the arrows in their back.”
Bringing a new product or service to market is not easy, especially if you have to educate the public alone. If you have billions in investment capital like, say Uber, it is possible. Unfortunately, there is no guarantee of acceptance, or path to profitability.
It has gotten somewhat easier. In a world of social media and the internet, a product or service has the opportunity to break through some of the clutter and perhaps go viral.
Sometimes education and change is forced upon us. Take the airline industry, for example. One “crazy” airline decided to tell its customers that buying a ticket to travel only got them on the plane. They would have to buy another ticket for their luggage. The public was in an uproar and may have avoided that one airline if it weren’t for the fact that most all of the other airlines then followed suit.
This pioneering change took a “money losing” industry and turned it into a massively profitable one. Surprisingly, the original airline didn’t disappear. This is not an anomaly. The hotel industry followed suit by adding resort fees. Many hotels today quote guests the room rates, then turn around and tack on resort fees for using the lobby, fitness facilities and pool, whether you use them or not. This author just paid a resort fee at a small hotel in midtown Manhattan. They had neither a pool, a fancy garden, and if you blinked, you missed the lobby.
Pioneering and educating the market doesn’t have to be a death sentence for a visionary idea. Nor does it have to cost billions in education. If you can get support from a few industry players who can benefit, education and idea adoption can possibly go viral.
That’s what’s happening in the vendor “early pay” space. In the case of “early pay” one might say it’s a matter of re-education. Fifty years ago, it was common for business to offer and accept early pay discounts. To old timers, 2 percent 10, net 30, was a common line on most invoices. Most vendors would offer buyers a 2% discount if the invoice was paid in 10 days and no discount if paid in 30.
These terms seemed to go away when money in the 1970’s got expensive and hard to find; it was also when corporate takeovers became popular and corporate raiders were looking everywhere for financing. Enter the vendor. Instead of discounts for early pay, buyers wanted to hold onto vendors’ money; not for 30 days, but for 60, 90, even 120 days. This way they could use that money in a takeover, or pay dividends to the new investors. Vendors accepted it, which led to changing the buyer/seller relationship for years.
Since that time, vendors have had to endure extending longer terms to buyers and shrinking gross margins, forcing them to look for their own financing just to support their customers’ buying habits.
The tide may be turning. Buyers have realized that they have brought their supply chain to the breaking point by asking for lower costs and extended terms up to even 150 days which hurts the vendors. To repair the damage, buyers are now adding relief in the way of early pay discounts. If vendors can’t wait 120 days for their money, buyers can offer to pay vendors early for a discount. It’s not 2/10 net 30, it’s more like 2/5 net 90.
As with the airline industry charging bag fees and the hotel industry imposing resort fees, large cap companies (The Fortune 500) require early pay discounts in order to pay vendors for products and services they purchased. The mid-cap companies have noticed. They are starting to stretch their supply chain, as well asking for 60, 90 and 120 days to pay. “Early Pay” is what they need now and “Early Pay” is just what AeroPay Express provides.