How to Work with a Paper Merchant
As a mill rep, I sold paper through merchants. As a printer, you probably buy paper from merchants.
I found that most merchants make money selling paper, but there are a few who make money buying paper.
How do they make money buying paper? I remember a story, told to me by a merchant executive, about how some of the company’s sales reps were celebrating a drop in the price of paper. Why were the sales reps happy? Because they knew that for at least some of the orders they had in place, they could buy the paper at the lower price, but would not have to pass the savings on to the printer. Since they were paid a commission on the gross margin, this meant more money in their pockets, while everyone else was a loser: the mills that had lower prices, the merchant house whose inventory value went down, and the printers who were not getting the reduced market price.
I remember another story. I was playing golf with a guy whose friend was a merchant sales rep. He said the paper business was a strange one, and explained that his friend said he made money when prices went up and when prices went down, but not so much when prices were stable. When prices went up, he was able to get the increases from the printer, but was also able to delay paying the increase to the mills. When prices went down, he was able to get the lower prices from the mills, but not pass the lower prices on to the printers.
How do you avoid these situations? One thing I’ve said before is that printers and mills should work together, and merchants are an important part of the equation. In selecting a merchant, you need a strong merchant rep with a strong merchant house behind him or her. Of course, they must buy paper well, but they must also add value—and by adding value they earn their money selling paper.