The Effects of a Declining Business
Jeff R Graham, "Just Ask Jeff" talks about what is up with manufacturers' declining business and the effects it causes like the lack of product support.
9 Minute Read
Wonder why manufacturers are going out of business and getting product support is difficult? These are my opinions. Other people may have differing ideas.
In the old days manufacturers supported their dealers and did not let the product "dumping" and "discounting" that is currently being done in the market by some discounter's happen. I have nothing good to say about these people, they are basically spoilers and are causing a lot of problems.
Yes, of course people always want the best price, that is human nature. But remember when some people's business practices get "predatory", markets and products are often changed and destroyed to the detriment of everybody. That is why there are laws against these business practices. Unfortunately the laws are very hard to enforce and cost a lot of money to prosecute.
Yes, it is happening right now, I can easily point to several discounters where products (laps and other things) are being sold at below what a lot of dealers have to pay for them.
There used to be dealer networks that were supported by the manufacturer's and a reasonable profit was maintained on the products the dealers sold. The profit and price did vary from dealer to dealer, but products were not sold at cost and below cost, like they are in a lot of cases now.
So in the past with manufacturer support… When there was a problem and particularly in the case of a questionable problem. Like… "Is it manufacturing?" or "Did the person do something that caused the problem with the product?"
The dealer could afford to just replace it because there was some profit in the product and the dealer was not losing their shirt if they replaced some thing questionable once and a while. Plus the manufacturer's were trying to support their dealers and were much easier to deal with.
Now with virtually no profit in a lot of products (like laps, for example) and zero manufacturer support. I do mean ZERO support, it is happening on a lot of products, not just laps. A dealer's options are pretty limited.
Now if a dealer has a product come back that had almost no profit in it when he sold it. What does a dealer do? There are two options:
The dealer can be a nice guy and try to help and hope he can get the manufacturer to exchange it or lose money, and make a customer happy. Which is what most dealers try to do. But there is a limit to how much of this a dealer can afford.
The other choice is refer the customers back to the manufacturer and let them deal with it. Which basically means in most cases, the manufacturer will not do anything if they have a choice.
Most manufacture(s) are doing absolutely nothing to support their honest dealers. They are letting the discounter's run wild. The bottom line is that most manufacturers are very short sighted in my opinion (I am being polite).
They want to sell as much product as possible and they do not care if their dealers make a penny. They do not support them or their customers given a choice.
If they do not support their dealers. Why would they support a guy that buys one (1) of something, a lap for instance, and has a problem?
The effect of this is… Yes, the customer is getting the best price (often cost) but the result is and will be… NO service.
The discounter's seldom give much service, they cannot afford to give any service in the long term on their products at those prices. They do not make any money or so little on a lot of products they sell, they just cannot give any service.
The discounter often has other income (could be anything from retirement to illegal things, I have seen all of it), or is trying to run everybody else out of business (it is called dumping and is not uncommon), or is just stupid, take your pick. Stupid gets my vote on some of them.
The honest dealer trying to make a decent living is trapped into a price competition he cannot win with discounter's and cannot afford to match prices and still give quality service.
The manufacturer's are saying "not our problem", unless you can prove it was a defect in the manufacturing, even then I have fought some of them for almost a year (more than once) to get replacements.
In one case I quit paying a particular manufacturer (a very large one) until they started screaming, then I brought up the subject of making some of their defective manufactured products that I had returned to them a YEAR earlier good. They very grudgingly did, but only after a hell of a fight and because they wanted to get paid. This is not unusual, I know several other dealers with the same story.
The result of all the discounting is that the free market system finds it own balance. With no supported dealer network, there will be no service. You got a bad product? Tough, good luck getting any service… that is how it is getting to be from the manufacturers. That is to their own dealers, who buy a lot of product. What do you think they say to the average customer?
Here is some more information. Because of no manufacturer support on the discounting issue, dealers will eventually have to refer problems back to the manufacture or quit carrying the products. It's happening now.
In a lot of cases honest dealers will just quit carrying those products. Ever wonder why I do not carry some faceting machines and other products?
Wonder why some of these old time manufacturers are going out of business? I can name several that are out of business and know of quite a few more on their way. There maybe other reasons some of these people went out of business. Like retirement, but even then if the business was making money it would usually be sold or run by some one else, not go out of business.
But I can almost guarantee that most of these manufacturers were not supporting a good dealer network, and they let discounter's prostitute their products. Just look at who was, and who was not carrying their products, in most cases you will find a couple discounter's selling them cheap (online usually, but not always).
Which in turn caused a lot of honest dealers to say "forget it" I am not going to carry your product. These manufacturer's did not go out of business because they were making a lot of money. They went out of business because the made very poor decisions which resulted in them not making any money.
You will not find their products at your local lapidary shop. Shop owners with honest over head cannot compete, and will not try. What happens is the manufacturer's lose "market share" and go out of business. Heard that?
Here is a couple of simple questions:
- As a manufacturer: "Would you rather have hundreds of dealers supporting, recommending and selling your products?"
- "Would you rather have a few dicounter's dumping your products and doing as little to support them as they can?"
Sounds simple, but most manufacturers do not seem smart enough to make the right decision.
Also as these manufacture(s) because of their short sightedness, have to deal with problems that dealers used to handle. The manufacturer(s) will sooner or later decide the product is not profitable and quit making it or make it cheaper and lower quality.
Think that will not happen? You are wrong. I have already heard talk about manufacturers not making some products any more because they were not making enough profit on them. Some of them might surprise you too.
Also, I do not know if all the manufactures have left the USA, but I know for sure a majority of them have moved to another country because of "cheaper labor" several years ago. This trend is of course not limited to lapidary. You may wonder if some of the quality issues are because of this? Absolutely..
If the quality of these manufacturer's products declines below a certain point, and they may if they are "saving a buck" by chasing "cheap labor" in another country (China, Korea, Mexico).
Then most dealers will quit carrying them, not even considering the discounting issue. They will have to, not hardly any profit in the first place, no support, and cheaper quality and all the problems "cheaper labor" brings.
Think the discounting and no dealer support from manufacture's is not your problem? Maybe if you are just worried about price. But there are other things besides price to worry about.
Just remember that when you need help with a product and the discounter says "talk to the manufacturer", and the manufacture says "not our problem" or does not answer you. If you can still get the product that is.
Like I said the free market finds it's own level. Just my opinion.
I will continue to try to support my customers as best I can. But keep in mind if these trends continue I will sooner or later be forced to let these types of manufacturer's "handle" their problems or just not carry their products. As the manufactures of laps and other products go to China and Korea I will be forced to send customers to the manufacturers for quality issues.
I already do not carry quite a few faceting machines and other products that the manufacturer's do not support their legitimate dealers on. Products that the manufacture's have let discounting and dumping kill. Ever wonder why I do not carry a product? Now you know.
There is a cause and effect in life and business. A reason some of the faceting machines and other products were being dumped by discounter's and why those manufacturers are no longer making that product or are not in business.
Still wonder why some of them are out of business? I am not the only one discontinuing their products. Losing legitimate dealers will eventually put most of them out of business or into selling direct. Selling direct is not something most manufacturers are able, or want to do.
Note: I know this for a fact… There are a few manufacturers supporting honest dealers and they are gaining major market share and doing well. Some of the dicounters are still claiming they can sell these products, but they cannot and frankly the fact that they claim they can, should say something about their lack of ethics.
I am about the only person I know making these issues public. You may not agree with me but this is how I see things in the business. Time will tell. In the mean time I will do the best I can for my customers.
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