It's Not Just Business; It's Personal
By Tim Nissen
"It's Not Personal; It's Just Business." With those words, a
distributor pulled our second best selling stove line for the past four
years and effectively concluded an eleven year relationship. We had won
sales awards all four years from the manufacturer, but the primary reasons
given were declining purchases this past season, and the fact that the distributor
intended to market fireplaces directly to builders in this market, competing
with us and other dealers. A spa store had been recruited to sell this
particular line of stoves. We explored legal options, of which there are
several, but decided that this marriage was over, and we were better off
pursuing positive options.
Last week we got a form letter from another major supplier threatening to
"compete against you in your market," if we were to sell competing
lines of cast iron stoves. "We will not sit idly by while our sales
are impacted." As it happens, we no longer show either of these lines,
for sound business reasons, we believe. However it is worth noting that
this same manufacturer has recently chosen to market their new gas products
through a separate distribution channel to HVAC contractors, who compete
against me as a specialty hearth products retailer. The manufacturer claims
that positive incremental sales are involved in their strategy. I can't
help but think that positive incremental sales might be earned via a dealer
commitment to diverse enamel cast iron products. I can't help but think
that committments cut both ways.
We also sell a major gas fireplace line to builders and for the past three
years have achieved a higher than 50% market share with this company's products,
in a fairly competitive market. Our unit sales with this line have increased
over 70% in two years. Last month this manufacturer set up a large regional
distributor with the same line, stating that they wished to "clean
up distribution." So, we have gone from two to three distributors
in an already competitive market. We fail to see how this move cleans up
distribution in this market, and we wonder about the heavy investment we
have made to establish this brand as the market leader. Again, committment
cuts both ways, and we are wondering about the balance is this relationship.
Anyway, this has been an interesting spring in the Salem, Oregon market,
and I am sure that it's been interesting in your market too. These events
have pointed up some important points about business and personal relationships.
I have done a lot of thinking about these events and offer the following
thoughts in the hope that Hearth Products Industry members will find them
provocative, even if you don't agree with them.
First, I strongly disagree with the business vs. personal split. It implies
that it's o.k. to treat your business relationships differently and worse
than you treat your personal relationships, that it's o.k. to screw your
customer, but not your friend, that it's o.k. to tie up a line to keep a
competitor from having it, but not o.k. to steal from a neighbor. In my
opinion, personal relationships are at the core of successful business relationships.
My customers are people, and we deal with them personally, in a businesslike
way. We intend to communicate clearly and honestly, to be fair and flexible,
and to be mindful of the personal business relationship. As a customer,
I expect to be treated in the same way.
Secondly, if there is any alternative at all, why would a dealer do business
with a supplier who competes against them? The installing distributor
aiming for the builder customer can't expect to sell to dealers who seek
that same builder,s business as well. The "whole-tailer," who
sources product direct from the manufacturer and expects to re-sell to dealers
who are competing for the same customer are kidding themselves. No dealer
is going to be loyal to a supplier who is also a competitor, especially
one that has a pricing advantage.
In addition, a product that once was sold exclusively through specialty
stores and is now available via competing HVAC dealers is of lessor interest
to that dealer. For example, Makita drills were once a specialty store
item, now they're everywhere, including Costco and Sam's, and the specialty
tool store is featuring other drills. I can't blame them a bit. As the
market for gas products expands, manufacturers are seeking new channels
of distribution via HVAC dealers and retailing gas utilities. They are,
of course, free to do so, but shouldn't expect specialty store customer
loyalty in return.
My conclusions about this interesting season?
First, there are manufacturers and distributors who support the specialty
hearth products retailer exclusively. If you are a specialty retailer and
you have a product line where you have a reasonable territory that you can
service, the full attention and support of your supplier, this line, or
those lines, deserve your highest priority. These lines deserve your full
commitment in terms of display & merchandising, advertising & promotion,
sales & service. Vote your pocket book.
Second, effective, profitable business relationships are personal. They
involve clear and honest communication, balance in short and long term thinking,
and trust. The smaller the business, the more personal it gets, and the
hearth products industry is made up primarily of small businesses. So don't
tell me it's just business.
Afterword (April 9, 1996)
Distribution patterns in the hearth products business have continued to
evolve. In our market we have seen consistent gains on the part of heating
contractors, mass merchants, installing distributors, the gas utility and
retailing chimney sweeps. Most of the growth and the new action has been
in gas. However, few products lend themselves to specialty retailing the
way hearth products do, and we have more than held our own. While we havn,t
grown much these past two years, our profitability has improved, primarily
because we insist on a certain gross profit, which we earn by doing a better
job at every step than our competitors, especially with excellent installation
and repair service.
It,s interesting to note that the distributor I wrote about and their new
retail outlet (the spa store) both failed and effectively went out of business.
The manufacturer of the line in question, Quadrafire, remains committed
to the specialty retailer, but is now selling direct. Losing the line turned
out well for us, as we added two new lines that we have done well with.
I feel bad for the people involved, but we all live with the consequences
of our decisions, business or personal, good decision or bad.
Vermont Castings has continued strong development of their new distribution
channels. Wonderfire is aggressively sold by a variety of utilities and
heating contractors and installing distributors. In most cases, there is
no difference between the Vermont Castings brand and the Wonderfire brand.
New products like the bar-b-que, cast iron furniture, gas logs, and new
fireplaces are being introduced and marketed through both channels of distribution
simultaneously. Sometimes both the Wonderfire and the VC reps are calling
on the same account! When I asked some questions about pricing and who
my competition was likely to be, I was told, "We are trying to grow
our business and can't be hampered by those dealers who aren't attempting
to grow.
We continue to sell Vermont Castings, and our numbers are up with the line.
It is no longer the franchise line that it once was and we believe that
we spend a lot of time selling Vermont Castings/Wonderfire product for dealers
who make up for a lack of knowledge, showroom, personnel, promotion, installation
and other service with cheap prices. The Wonderfire dealer is often a parasite
feeding off of the efforts that others have made over the years to establish
the name and reputation of Vermont Castings. We,ll continue with VC as
long as it makes good business sense for us.
Heat N Glo has also continued to work multiple channels of distribution.
In our market there are three distributors and they will aggressively sell
to anyone short of direct to the retail consumer. We have seen more and
more competition from other retailers, heating contractors, the local gas
utility and others, all basically selling the same product. It is a very
strong line of products, and we have a tremendous investment over the years
in making it successful in this market. As long as Heat N Glo continues
to be the market leader in high efficiency gas fireplaces, and as long as
we can compete, we,ll stick with our program. Our attitude toward Heat
N Glo is the same as their attitude toward us. We are going to do what's
right for our customers and our business. If Heat N Glo helps give us the
marketing mix to compete profitably, on we go. If we can,t, then we'll
need to either change or go out of business.
To conclue, I,d have to say that more and more, it is just business, and
I feel compelled to do what's right for my customers, my employees and my
business. While personal relationships with our customers, suppliers and
employees are critically important, performance counts for even more, and
we believe that we can perform best with our strongest emphasis on products
where we are fully supported by the manufacturer.
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