Catering equipment distributors are urging manufacturers to take a more discerning approach to trade discounting in a bid to halt falling margins blamed on internet sales.
Traditional kitchen houses continue to come under fire from web shops offering product at what is perceived to be below recommended prices. They believe suppliers should do more to recognise dealers that deliver added value through the provision of services, support and showrooms in 2014.
The ease with which individuals can set up internet businesses and secure credit and buying terms that mirror established distributors remains a frustration for many.
Mark Drazen, MD at Caterware, said clients were using low prices seen online to lower costs: “The internet is continuing to drive down prices by giving ‘easy’ price guides to customers who would never buy off the internet anyway, but still require distributors to match the prices they have discovered.”
He called on manufacturers to lower discounts to internet companies and restrict the supply of non-plug-in items.
Colin Chettleburgh, director of Broadland Catering Equipment, said pressure on margins from internet sales was a “major issue”. He remarked: “We have to recognise the market will decide what is the right way to sell, but it is very difficult to provide the right quality and quantity of advice and service on one hand and compete on price with web sales on the other.”
Martin Hall, GM of Brakes Catering Equipment, said some internet dealers were operating on “ridiculously low” margins and urged manufacturers to take greater ownership of the situation to protect regular dealer partners that add value.
“I would like to see manufacturers implement a better differential discount between large and small distributors,” he commented. “They are too close at the moment, to the point where somebody working out of a ‘spare bedroom’ can continue to prosper even when competing against a larger dealer who is buying 10 times the volume from the same manufacturer.”
Manufacturer pricing structures was one of the key issues that emerged from a special feature on the challenges that dealers face in 2014. You will be able to read the full report in the January issue of Catering Insight, out next month.