“Hell has no anger like a despised stationery dealer.”
That was the opening salvo of an Instagram post from Lisa Krowinski, founder of Sapling Press, a Pittsburgh book printing and printing company. Ms. Krowinski hesitated after Paper Source, the stationery chain with 158 stores, abruptly filed for bankruptcy on March 2nd. Her five-person company had filled large orders from the chain in January and February and was owed more than $ 20,000 for items like Father’s Day cards and tea towels.
The post attracted a number of comments from other frustrated card makers – a niche industry dominated by women entrepreneurs – who were also concerned about whether they would get paid. Paper Source emailed vendors the day after filing for bankruptcy saying they would be paid in full for goods shipped on or after March 2nd and to file claims for the Retrieve the rest.
“As a community, we feel that we have been exploited in ways no small business should have done, especially after a pandemic,” said Ms. Krowinski, 46, who sold goods to Paper Source for nine years. “It hurt especially.”
Founded in 1983, Paper Source is the youngest national retailer to file for Chapter 11 bankruptcy protection during the pandemic. This process has been used by companies from JC Penney to J.Crew to keep their brands alive while stepping out of leases and reducing debt.
It differs from Paper Source in that vendors say the company placed significant new orders for cards and gifts in advance of submission, and even pushed for shipments to be expedited. It is now unclear how much money the sellers will get back. The providers are mostly creative women who run small businesses alone or with a handful of employees.
“Women have already been hurt so disproportionately as men in this pandemic, just in terms of the types of work we do and the families we have to look after,” said Janie Velencia, the 30-year-old owner of the ticket office in Lorton. Va., Owed $ 15,000 by Paper Source. “They did this to a number of female-owned companies during Women’s History Month and just before International Women’s Day.” (Paper Source is currently selling products that celebrate these events.)
Paper Source is now addressing the unusually public fallout with its vendors who happen to be in the trade of keen and skilled communications to keep operating. The Chicago-based company placed its orders in January and February “with the thought process at the time that we would actually avoid Chapter 11 and potentially bring an investor into the business,” said Winnie Park, chief executive officer of Paper Source, in an interview. “Unfortunately, these options did not materialize.”
Ms. Park said she was concerned about online misinformation about the bankruptcy and that the company intends to create a webinar to help its 1,200+ vendors understand claim filing. She hoped that suppliers, some 250 of which are card makers, will receive “normal or near full payments” through special funding for “critical suppliers” and a court ruling that prioritizes suppliers whose goods were received in the 20 days prior to filing.
“Our intention has never been to hurt women or business owners,” said Ms. Park, 49. “We have been through a pandemic that has been longer and deeper than any of us expected, and we have a way forward that we want these women entrepreneurs to be a part of.”
Still, three vendors shared emails from Paper Source saying the company offered them payments from the fund to critical vendors who were between 10 and 30 percent of their debt. In exchange for the money, Paper Source said it would require confirmation that the chain’s vendors would continue to deliver goods, according to emails shared on condition of anonymity because they were confidential.
One of the biggest sticking points with providers is the orders in January and February. You wonder if Paper Source knew it was making purchases it couldn’t pay for – at least not in time. Paper Source usually pays for goods 30 to 60 days after receipt. According to court records, the company prepared for a Chapter 11 filing in early February after receiving no capital injection or interest from 138 potential buyers last year.
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Alex Gagné Glover, founder and managing director of Chez Gagné, a Los Angeles card and beverage seller, said Paper Source placed large new orders for cards in letterpress for anniversaries at their four-person company in December, January and February (“This life doing with you is pretty awesome “) and friends (” you are my soul sister “) and urged them to be delivered by the end of February. She believed the orders represented a glimmer of hope for post-pandemic sales. She said the chain now owes her more than $ 20,000.
“It’s just very shady that they were placing so many orders with so many small businesses before filing for bankruptcy,” said Ms. Gagné Glover, 33.
Ms. Velencia said most of what was owed to her came from orders that year. Sapling Press announced that it had received its largest order in months from Paper Source in early February. Steel Petal Press, a stationery and gift store in Chicago, said it was waiting for five pending payments from Paper Source, including three pre-bankruptcy orders that needed to be expedited.
“There was no reason to place a $ 7,000 Father’s Day order – those cards didn’t go on the shelf in mid-February,” said Ms. Krowinski of Sapling Press.
Ms. Park said the orders were unrelated to the company’s bankruptcy. Paper Source has been trying to revive its inventory for months, largely because it has about 27 new locations in stock that it had recently acquired for the pandemic through the bankruptcy of Papyrus, its former rival. “We’ve been trying to get our inventory of greeting cards into a healthy position since last October when it was clear we were really low on inventory,” she said.
But the move added to the confusion among sellers. “The fact that January came and brands were starting to get these big deals, they were happy and excited that they thought this was great, things are back on the up and then it wasn’t,” said Katie Hunt, one Business coach who works with stationery vendors through her company Proof to Product. “The optics are bad.”
Privately owned for years, Paper Source is a relatively small retailer but a giant among stationery makers, a friendly industry with regular trade shows and even “paper warehouses” where aspiring card makers network and learn how to import their wares Bookstores and other chains like Nordstrom. Due to its size, Paper Source can set concessions such as longer payment terms. The company has even requested loans of up to $ 250 from vendors to help build new businesses, according to emails from the New York Times.
Paper Source employs approximately 1,700 people, most of whom work hourly, and had gross sales of $ 104 million last year, up from $ 153 million in 2019, according to court records.
As with many retailers, Paper Source sales declined over the past year as records reported downtime, capacity constraints, and the “wave of canceled weddings.” It closed stores, eliminated jobs, and lowered executive pay. The company estimates that 30 percent of its formerly loyal shoppers have not visited a store or bought from its website since the pandemic began.
Court documents show it has more than $ 100 million in debt and leases that cost $ 36 million annually. The company, which was majority-owned by Investcorp, secured short-term financing as part of the filing and plans to sell to lenders by the end of May. Paper Source declined to comment on specific costs associated with its debt.
Many vendors said they understood that Paper Source was being challenged by the pandemic. While Paper Source can be restructured, there is no guarantee of when or how much its suppliers will be paid.
“I don’t think anyone is mad at Paper Source for filing for bankruptcy,” said Kyle Durrie, who owns the Power and Light Press in Silver City, New Mexico and owes about $ 8,000 from Paper Source. “When I think this hits a lot of us really hard, we just feel like we’re being taken advantage of and we have no rights or recourse because we’re so small.”
While some vendors said they would no longer work with Paper Source, Ms. Park said she was optimistic that with more education, relationships would improve.
“Bankruptcy is a worn-out road for those professionals who deal with it and do it every day,” she said. “It’s confusing for a community like Paper Source that has never been through it or our creators who have never been through it.”
Gillian Friedman contributed to the coverage.
Contact Sapna Maheshwari at [email protected]