Negotiating better deals with vendors
By Janet Pinkerton
Last year, Steve Hayes, past president of CEDIA and co-owner of Custom Electronics in Falmouth, Maine, stood up in front of a group of fellow Elan Home Systems dealers and encouraged them to ask manufacturers for pricing discounts beyond standard terms if they had good histories with their vendors.
Hayes' candid discussion of how and why his company successfully negotiated prompt- and pre-pay vendor discounts occurred during a dealer forum within Elan's 2004 TRIO event in Lexington, Ky.
"I about jumped out of my chair," remembers Paul Starkey, Elan's executive vice president of sales and marketing. "I didn't think it terribly appropriate.
"It's not to say there are not opportunities for dealers to cut better deals with manufacturers," Starkey explains. "We have chosen not to do business this way. A manufacturer's culture will determine how willing they are to do this."
Manufacturer culture, business model and need for cash flow, one might say.
Using the prompt-pay issue as a starting point, we interviewed a variety of dealers and vendors about what's up for grabs and what's important in vendor/dealer negotiations.
Some dealers and buying groups negotiate whatever they can, with everything up for grabs. Other vendors and dealers say opportunities to deal are drying up—especially in video, increasingly in audio—given vendor margin reductions and sales force cuts in the face of competition from multiplying Pacific Rim manufacturers. Some vendors say they never deal, citing very specific marketing and finance reasons. No vendor jumps up to admit, "Sure, I deal."
All of this negotiation occurs against a backdrop of federal law that prohibits buyers and sellers from price discrimination. These laws require vendors to give all buyers information about all of the pricing and programs available to them.
The real clincher for any point of negotiations, all parties agree, is the relationship—and the future of that relationship—between a vendor and dealer and/or buying group.