Industry debates web-based dealers

No sooner is a story about MAP or web-based catering equipment distributors posted on this very website, than more voices are added to the debate.

Everyone has an opinion about how fair or otherwise these internet businesses are playing with regards to margins, and how far manufacturers should go in vetting accounts.

For instance, John Ponsford from Exeter-based distributor, Bartlett, commented: “[Low margins] are a problem created by manufacturers’ greed for turnover. Instead of discounts based solely on turnover, manufacturers should be looking at dealer commitment, rewarding dealers who have showrooms displaying their products, are prepared to carry stocks of their products, and directly employ engineers who can service the products and offer ongoing maintenance.

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“All of these things cost reputable dealers a considerable sum of money, which is currently being undermined by internet companies with low overheads.”

Colin Chettleburgh from Broadland Catering Equipment agreed: “I respect customers will always determine market prices and attempting to change the market as a whole will be as effective as King Canute’s best efforts. Like it or not, the internet is here to stay.

“However, I predict there will be a day of reckoning. A well-known box-shifter is currently advertising a six hob electric range from a particular manufacturer 11.6% cheaper than I can buy it directly. That is utter nonsense and I go to great lengths to offer alternative products. The manufacturer has repeatedly refused to address the problem. That cannot be sustainable in any market with an independent after-sales infrastructure.”

However, regular poster ‘The Oracle’ questioned: “Why does everyone think it’s a simple solution to increase prices and that internet sellers are all home based? Many internet dealers employ a lot of staff and certainly have a large overhead. Often they have engineers as well. Just because you sell at low prices on the internet does not mean you do not support the product.

“Do I think prices are too low? Yes of course they are, but we live in a new world where huge companies like Aldi and Primark work on 3-4% margins. All of us have to get used to doing more for less and being as lean as possible to survive.” [[page-break]]

An anonymous manufacturer representative also believes that the lone, bedroom-based internet trader is largely a myth. “Even in the fragmented industry that is catering equipment distribution, things have moved out of the spare room. Furthermore the international brands, due to fiscal protocols alone, would find it impossible to trade with such companies even if they wanted to.

“Many manufacturers in retrospect would accept that in the early days of online sales, there was a lack of a coherent strategy on how to deal with e-commerce and the speed at which it was evolving. As with most uprisings though, the masses settle down eventually and in the past 2-3 years at least, most of the major brands have issued internet policies in an attempt to exert greater rigour and control, and of course protect their brand integrity. Some of these have attracted the attention of the CMA but overall there is less of a ‘Wild West’ feel to the channel than 10-12 years ago. In any case MAP is illegal in the EU – clear and simple.

“This greater sense of order in the market is partly because the so-called ‘traditional’ dealer community (is there really still such a thing?) has helped resolve this element themselves by joining the fray.

“Of course the same issue that faces high street retailers is now a reality for CEDA members and others; customers plunder your expertise, ask you to quote then buy it cheaper online. You can moan all you like but it is not going change anytime soon. It is no coincidence that those retailers who do thrive have both excellent shops and effective websites too.

“Additionally, businesses that were historically catalogue and trade advertising led, have naturally enough, morphed into fully functioning and effective web based traders. Then there are the food wholesalers, and light equipment and janitorial suppliers who have evolved, as all good businesses must, and now provide everything from a tin of beans and a paper cup to a CAD designed kitchen scheme, fully project managed.

“So, those who accuse greedy manufacturers of leaping into the arms of the so called internet fraternity, need to identify which part of the internet they are they actually complaining about. Most manufacturers were already trading with them! Adapting and evolving alongside it is the only way to thrive.”

Some distributors’ calls for tighter manufacturer account vetting have angered internet-based traders. Martin Lee from Cater Data said: “I am that one man band selling out of a room in his home but I have over 20 years’ experience in the industry prior to going it alone. Before that, I was at the sharp end in pubs and hotels, so I guess I know the industry fairly well.

“The industry is burying its head in the sand if it does not think that the internet is where growth is taking place. All my clients pay me ‘up front’ and in turn I pay all my manufacturers pro forma – no bank loans, no chasing up invoices and above all no overheads. These savings I pass on to my clients in improved pricing.

“Having worked for a distributor in the past, we were always chasing payments from clients. So I know where I would rather be, and I guess I am a lot less hassle to my suppliers than many a ‘full’ distributor. Finally, I do provide the same service as a distributor – I visit clients and still provide the same advice. Fitting is provided by independent Gas Safe registered engineers.” [[page-break]]

However, David Reed, key account manager at wholesaler, Blue Badger, bit back: “And that’s the point! As Martin points out, he has ‘no overheads’ and he passes on his consequential savings to his customers to win the business. No doubt, some of these customers have visited distributor showrooms to see the equipment and even attended a demonstration at a distributor’s expensive live kitchen facility before going online to buy at his discounted price. That’s another strong argument for MAP.”

Lee replied: “So what is the answer? The internet is here to stay and some of the larger suppliers have got into trouble for trying to use MAP. I guess there is a market out there for all of us. I still get out there and advise; I want my business to grow on recommendation, and that looks at the long term. However I do think that mail order companies might take some business, even on larger projects, as we can give some very competitive prices to our clients. Perhaps the distributor network could be looking at more specialised ‘installation divisions’? I already use independent installers for many of my projects.”

‘The Oracle’ called for a middle way approach: “No way should people working solely from home with no staff or overheads be getting the same discount as someone who has the overheads, premises and staff. Likewise not all distributors with premises and staff should get the same discounts. After all, some will be very supportive of a brand and others less so; some will carry stock and some will not; some will have showrooms and some will not. This should all be taken into account when discounts are set.

“One thing however is very simple. MAP and or any other type of price fixing, manipulation, agreement or whatever anybody wants to call it should be strictly disallowed. It is up to individual companies regardless of size and overhead to decide what they will advertise prices at and also charge.”

 

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