Business Management

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We hear it from just about every sector: technology, sporting equipment, kitchen & bath, cosmetics, home improvement, commercial audio, books on CD, vacuum cleaners and just about anything else you feel you might want to buy.

For integration contractors, it is very obvious – one of the biggest turds in the room is Amazon.

If you have found yourself in any situation with potential buyers, you deal with this almost every day. We get it. You have some very real and tangible disadvantages. You may have invested in a “brick & mortar” location or shop space. This involves a long-term financial commitment in the way of a lease or mortgage.

You invest in inventory.

You invest in marketing.

You invest in training.

You invest in socially adept & knowledgeable, people, the interior décor, utilities, someone to clean bathrooms.

Invest, invest, invest….spend, spend, spend.

Many have some outsourced accounting flunky, needed to let you know how much you owe your government, the bank, the landlord, insurance on several levels, the list is long, detailed, and carries severe personal and financial consequences if some little detail goes under-addressed.

In many cases, you did your best to score a job – the target customer experienced your compelling social engagement and marketing, explored your org on Yelp and the Internet, and then inquired about a system.

Your sales personal professionally presents the product services you offer, assisting in brand and model consultation, the client approves, then within the span of a few swipes of a screen they purchase that exact product from Amazon for less money.

A purchase that you arguably earned. That you developed and grew from a casual inquiry into a positive decision.

And Amazon stole it.

Are you pissed?

Is this really Amazon’s fault?

Really, a legitimate question. At the end of all the bullshit - this is not Amazon’s fault:

It’s your vendors’ fault.

Your vendor controls all of their distribution and the price that they elect to sell their products for.

Realize, if Amazon did not come up with this echo system and deeply invested in the logistics chain someone else would have. Amazon has just become the most dominant. They have financed in and built a back-end process and inventory engine that is nothing short of amazing.

Good for Amazon, - we all use them.

We all realize that our vendors can choose any market coverage strategy that they deem best for them. They can decide which models or SKU’s out of their line up that could grow their company through opportunistic market verticals.

They may choose to use a rep model or even go through distribution

The place where this comes off the rails is when they assume that demand from our channel will not be adversely affected with opportunistic approaches from online prospects they choose to exploit.

Here at CT. Lab, and Weld, we are not here to just yell "Fire! Fire!" We desire in all we do to equip you the integration population with actionable wisdom, not just call out over sensationalized industry dirt.

All of the above is no surprise for any on our channel. What should one do? Here are some opinions and suggestions.

  1. Our observation is that in this day and age, most dealers are more loyal to their vendors then many vendors are to them.
  2. Most dealers do not have a standard way to onboard a new brand or line, think about having a standard way to bring on and launch new stuff within your culture.

This should include a Vendor application and agreement that would require them to advise you before they choose to sell to aggressive online competitors. It certainly should be part of all ongoing discussions with your Rep and suppliers to measure their online strategies.

For most of us, it is not that they do it; the issue is getting shelled by surprise at a discounted price, and thus looking like a greedy ass in front of potential clients.

The purpose of doing this is to lay the foundation for a positive and predictive working relationship with vendors. Very few integrators currently use this method, so if you are just getting started you can have all your vendors (and/or Reps firms) fill one out.

By having the document filled out, the supplier is tensioned to disclose, define and discuss their distribution strategy and their position about on-line opportunistic sales – and what that could mean to your relationship (think “over- distribution”).

It also asks to get the buying group pricing - without your having to be a member. Nothing wrong with choosing to be members, just you don’t want to be disadvantaged by that one issue, and they seem to be gaining in popularity.

Nothing wrong with asking a long-term supplier why they would subject you to that pricing bias and disadvantage just because you did not want to join a buyer group… and why the vendor favors those who might not be as loyal to them as you have been.

3) Have a solid plan “B” on each of your important categories. We understand that having Sony and Sonos is really important, but these kinds of lines limit your margin, so could be backed up with a varied and well vetted plan on selling complementary products and accessories that will help the margin challenged brands.

Important Situational Note: There is a delicate dance we must address. Ask yourself, what is the very first and best thing a supplier can bring to their dealers?

In our opinion that would be a purchase order.

Demand for their products.

We all hear about how people come in and ask for Sony or Sonos, these vendors have done a great job and invested deeply in developing demand for their gear and respective product categories. We can’t fault them for that. Quite frankly, we all could use a load more of this kind of collaboration within our vendor community.

That investment in increasing demand deserves some level of preference or even margin accommodation from retailers, but when our disadvantaged cost of sale requires us to sell the products at a loss, there is a problem.

For a sample vendor application email me at frank@weld2.com and put in the subject line 'Vendor Application'.

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