‘Woke up this morning, gotta blue moon in your eyes…’
For UK OP dealers it has long been recognised that the Trade discount offered from retail on a vast number of essential ‘core’ products stood at 33.3%. In recent times as new product categories have been introduced, especially machines,consumables and FM ranges, it became apparent that there was insufficient margin availablity provided by manufacturers from these different industry sectors to maintain the ‘normal relationship’.
This morning a letter passed my way via Cambridgeshire telling dealers that new product Trade to retails from January will be at the new Trade rate of 31%
By the same token, the decreasing proportion of items supplied that fall into this ‘Trade Off’ group has been steadily eroding reseller margins and at the same time seen by the wholesalers as an opportunity to bolster their own reducing returns.
So, where does this take us, and do people realise, or more worryingly actually care, what is happening to these margin manipulations?
I can tell you firmly, that we do at Office Friendly!! I know we major with Spicers rivals, most people know that frankly, and I know that they aren’t alone in margin management. Indeed today, almost all of the players in our industry are constantly presented with opportunities and threats to our margins.
As the err…. ‘slow recovery’ (new phrase from economists for recession, apparently) takes hold we all need to be extra vigilant of changes to our conditions that have a massive effect on our profitability. I make no apologies here, I’m on the side of the dealer reseller, specfically our own members and whilst I understand the reasoning and the methodology employed, I really don’t like to see this creeping into the pricing process.
Nett pricing is becoming more ‘in vogue’ by distributors and wholesalers, alongside cost cuts and service reduction, to be used as the model going forward. In my opinion we need as key players in our industry to say enough is enough. Let’s work on strategies hand in hand and not in isolation with one benefiting at the expense of the other.
Soon maybe all trade skus will be at Trade less 31% and then 30% or even lower. Many more skus are taken out of the mix by their inherent ’Product Profitability Testing’ and thus selling margins for the dealers are reduced. In an age when we need to UP the product lines availability to sell a vaster array of products, it could be that we’re being blinded by smoke and mirrors. I might suggest that true partnership and co-operation is best managed by working on key selling out strategies between wholesalers & resellers that enhance the sales opportunities of both partners.
Thankfully with Office Friendly and Vow we do have an understanding and are working ever more closer to build dealer confidence and margin enabling this (dealer) part of the channel to survive.
We’ll be looking very closely at ‘Trade offs’, so to speak, in the near and distant future with a close and sharp eye.