By Mr Retail
We’ve mentioned that retailers should beware of price gouging customers as it may hurt a retailer’s reputation. But how about distributors and manufacturers?
Distributors are truly walking a tightrope these days as they are more limited in what they can sell compared to a retailer. If “Bob’s Car Stereo” is out of something and calls “ABC Distributing” for a part and it is out of stock, Bob simply goes down his list to find an alternate source. As a retailer, if we want to sell all three kit brands and all of the interface brands, we have that luxury. A distributor does not. For that reason, distributor challenges right now are surely as difficult as ours, if not harder.
But, that does not mean that a distributor should start making unwise business decisions now that may impact its business negatively in the future. Here are some of the things I have seen over the last year from distributors:
Reneging on pre-negotiated discounts.
“Holding inventory” to make more margin on it when a price increase is coming.
Raising prices beyond the price increase that came from the vendor.
Here is the thing. If a distributor needs to raise its minimum to qualify for free freight based on what it is paying Fedex, UPS, etc, that makes perfect sense. If it needs to charge a little more in shipping and handling on an order that doesn’t qualify for free freight, that makes sense as well. If a vendor has a price increase, of course it should be passed along to the dealer.
In short, all distributors are NOT indulging in shady pricing, and you can rest assured that retailers will remember who treated them fairly when inventory levels get back to normal. A distributor has a much smaller pool of clients than a retailer does, so its customers need to be valued and nurtured. Do not lose sight of this, distributors. We believe in you and need you.
Manufacturers also need to do their best to keep communication and integrity with their distributor and retailer partners. I know you are all as frustrated as we are, but it is a partnership and we need you as much as you need us. If you can add staff to help with all the extra communication that is necessary right now, then do it.
Please stop issuing price increases in the middle of the month with an explanation that any backorders will not be honored at the old pricing. We know you are trying very hard to make a living, as are we. All we ask is that you think about how much effort it takes for us to handle a mid-month, no- warning price increase. Give us an opportunity to plan for it. If we have $5,000 of product already sold and on backorder and then you don’t honor the pricing, we can’t go back to the client and ask for more money. What you can do is state that no NEW orders can be placed at the old pricing and that you will honor backorder pricing for a pre-selected period of time, not indefinitely.
This article is NOT meant to stir up controversy, but rather, my hope is that it will create open dialogue between all parties and help us work together to ensure a bright future for the industry we love.
About Mr Retail
Mr Retail offers opinions and information on car audio retailing for CEoutlook. He wishes to remain anonymous. He has owned a retail store in this country for over 20 years now. Mr Retail loves what he does and loves the 12 volt industry and is happy to share his hard won expertise.
Having been on all three sides (manufacturer, distributor, and retailer) I appreciate the different viewpoints. All three are critical to our industry and all have huge challenges of rising costs, and terrible shortages of parts, labor, containers and more.
Any of us that have been around for a while know that you don’t make it twenty or thirty years by gouging people and losing trust. That said, especially during these interesting times, we have had to make near instant decisions on IC chips on the spot market, increased sailing costs on containers, air freight charges, or over time. Costs are going up a lot.
I enjoyed Mr. Retail’s piece, and I find it kind of funny that some of the criticisms of his anonymity come from folks that don’t leave a name. 🙂
Writing a weird anonymously written article is silly, pointless, and childish. Both to write it and to spread it is a failure of this system.
Explain your feelings in a clear, concise and intelligent way and you’d have no problem putting your name on it. Anonymous rants are for consumer message boards, not a professional trade publication.
Mr. Retail you are very quick to blame distributors… and yes, some might be doing what you have stated. That being said, there are Tier 1 manufacturers that have cancelled all open backorders and said if you still want the product it will be at the new higher cost. Distributors cant simply absorb a surprise cost increase when the vendors do this to them. I DO NOT blame the manufacturers either. They are simply juggling their backorders and higher costs too… and not only has the cost of raw material needed to make the product that retailers need gone through the roof (if/when they even can source the raw materials) but the freight is killing them as well. The freight for a full container from Shanghai to the west cost has gone from about $3,500 to over $18,000. Manufacturers have to pass that on to the distributors, and the distributors to the dealers, and the dealers to the consumers. It is unfortunate, but it is not gouging or a conspiracy. You are asking to have better communication but your opinion screams out that you have neither talked to manufacturers, distributors nor anyone in the international logistics business about what is really driving unexpected costs hikes. Mr. Retail… I now know why you wish to remain anonymous. Just another person hiding behind his keyboard broadly, unfairly, and anonymously spewing out his frustrations.
All distributors are gouging with no exception. I see it daily. Let’s cut the bullshit and face reality. I’ve been doing business for 30 years. Customers are buying parts online way cheaper than we buy it from our loyal distributors. I am about to plan a trip to China and deal directly from Shenzhen.
I remember a distributor about 25 years ago that used to gouge dealers. I was new in the business, had a supplier I was doing business with, they came to me and showed me their price sheets and I almost fell off my seat. I said “ here’s what I’m paying”, and they dropped their price immediately. They were 10-15% more if I recall.
I don’t have an issue with the manufacturer issuing a mid month price increase. It’s annoying because who wants to go through and update those prices in our computers and on display every couple months, but it is what it is. Manufacturers are doing their best to source chips since AKM went down and it’s understandable the pricing on these raw materials has shifted dramatically due to that and a variety of other reasons. I think they’re updating pricing as soon as they secure the raw materials.
If a manufacturer scores a bunch of chips and starts shipping me radios, and they’re also spending extra to air freight them in to get them to us quicker, I have no problem paying extra. You shouldn’t be selling inventory you don’t have in stock. Sell what you have or what you know 100% is readily available and then the price increases won’t hurt your bottom line. If you have clients that insist on reserving a backorder, explain to them that pricing and ETA is all subject to change due to incontrollable variables. I explain the chip shortage issue to every client and start our conversation by, “Well due to the chip shortage, here are the options we have in stock today that will cover all the features you’re interested in.” Don’t even discuss models you don’t have in stock.
This Mr. Retailer thing is kind of a waste. Instead of all the bland pronouns and vague descriptions, do some real journalism and call these people out. If you are hearing these sorts of issues from someone, verify the facts, get a second source that shops at the same distributor and can back up the claims, then let us know who it is. Without accountability, no “shady” distributor is going to change their ways just because someone anonymously whines about it.
Now if they were called out publicly in our community, we can stop buying from them, then they can feel the pinch and shortsightedness in their ways.
Thank you. We always appreciate constructive feedback. It’s not unusual for guest editorials to raise sensitive issues in a generalized manner.
I actually find their editorials quite amusing and informative. Never should ANYBODY in this industry call out anybody by name. They are just having you watch out for the gouging. It is YOUR job to verify pricing. You should also have the manufacturers and distributors price sheets. choose which one suits you better for not only price, but also service. I pay more through a local distributor on most items, but they offer a better warranty process (free pickup/exchange), etc…. It’s worth the extra money to get the better service.