Wag the dog
November 10, 2003,
If it proves nothing else, the latest contretemps in the Pillowtex drama demonstrates at least one thing: economies may evolve, companies may die, but chargebacks live on and on.
The flurry of legal filings began a few weeks ago when Target — in the guise of a vulture picking over the carcass for that last scrap of meat — asked the Pillowtex bankruptcy court to grant it nearly $2.5 million in chargeback money.
The filing asserted that Target Corp. and Mervyn's were suffering "considerable hardships" because of Pillowtex's "unscheduled" bankruptcy and liquidation.
Where is Yosarian when you need him? We could dwell on nothing more than that single upsidedown statement, but let's move on.
Now Pillowtex — or what's left of it — has filed suit against Target Corp., its Mervyn's division and May Company for more than $9 million in current and past due invoices. It's also challenging some of the chargebacks.
Pillowtex alleges in its court papers that some of the unpaid invoices from Target are up to a year old — and some of the reputedly unpaid May Co. invoices are nearly two years in arrears. Talk about your favorable terms!
Bubbling under the surface of this brouhaha is the question of how well Pillowtex prepared its customers of the fate that was about to befall them all.
Several of the company's largest retailers insisted throughout the mill's decline that Pillowtex kept in daily touch and was absolutely frank about its prospects. However, some other vendors that wound up leaping into the breach to fill shelves previously stocked by Pillowtex insist that isn't exactly so.
In any event, this bears acknowledging: nearly all of Pillowtex's key retailer accounts continued to do business with the failing mill right up to the bitter end. They could have cut and run. They could have brought their specs to other suppliers much earlier than they did and simply moved the business away.
That most retailers remained until the ugly bitter end was, perhaps, in their obvious self interest. But it was also a clear statement of how loyal a retail customer can be.
One major customer reportedly cut a timely check or two during Pillowtex's first bankruptcy to ensure the manufacturer could meet its payroll. During the final days of its decline, a couple of retailers even boosted their orders so that they would have enough stock to see them through their key selling events.
Those are tales that fly in the face of assumptions about retail disloyalty.
On the other hand, the current fracas involving allegations of unpaid invoices by Pillowtex and demands for one last round of chargebacks by its customers only confirm assumptions about the cut-throat nature of the business and its players.
It's the old carrot and stick style of doing business. It's just that the stick is a 60 lb. sledgehammer.
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