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Paper Source files for bankruptcy, leaving many small craft businesses in a jam

(BUSINESS ENTREPRENEUR) Paper Source declared bankruptcy in March, affecting much more than their own market with a ripple effect of damages.

Small business owner drawing calligraphy "Hello!" on brown paper sourced from Paper Source.

Paper Source, a paper goods retailer with national connections, filed for Chapter 11 bankruptcy on March 2, 2021. In an age of screens and PDFs, the ripple effect from Paper Source’s closure still reached out far beyond the company itself, affecting small paper goods businesses across the country.

The bankruptcy—and the fallout from it—serves as a brutal cautionary tale for small businesses hoping to partner with national retail chains, as one of the stipulations of the filing entails a lack of obligation to pay any outstanding debts.

Many smaller paper goods businesses reported large orders from Paper Source in the weeks and months leading up to the filing, which, to some, indicates a level of maliciousness on the behalf of the corporation. The bankruptcy claim leaves Paper Source in debt to over 250 separate vendors, some of whom are owed up to $20,000 for orders placed pre-filing.

Morning Brew points out that many of the smaller paper goods businesses currently burned by Paper Source are owned by women, and the majority of these businesses operate with small teams.
Additionally, many vendors expressed frustration at being “burned” by what they viewed as the traditional path to success. Attaining a relationship with a large retailer is, for many smaller businesses, the golden ticket; Paper Source’s questionable behavior in this case is causing some of its prior clients to rethink their partnerships in the future.

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The filing comes as yet another blow to the stationery market. The pandemic certainly dampened consumer interest in things like greeting cards and the like for several months, and plenty of paper goods sellers reported that the usual holiday surge in orders wasn’t enough to make up for the damage.

Paper Source placing so many large orders in January helped these vendors feel optimistic, but the bankruptcy filing left them lost again.

While alternative retailers like Etsy and local “mom-and-pop” locations provide some relief for these poor businesses, Paper Source undeniably burned a lot of sources—and, if one considers their activity leading up to the filing, they may have done so willingly. It’s often necessary to work with larger retailers as a small business, but Paper Source certainly makes a compelling case for finding other avenues.

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Jack Lloyd has a BA in Creative Writing from Forest Grove's Pacific University; he spends his writing days using his degree to pursue semicolons, freelance writing and editing, oxford commas, and enough coffee to kill a bear. His infatuation with rain is matched only by his dry sense of humor.

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