It’s PRICE,PRICE,PRICE….but beware the changes….

          ‘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%

who's got the margin?

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.

or slice of the wedge.....

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.

how NOT to partner !!

Excitement in the run up to 2011

I wonder how many times I’ve written… ’It’s  that time of year again’ ?

So, here goes;

so, It's that.......

It’s that time of year again…..when we at office friendly are looking to put our main deal to bed for a year or two. certainly it’s been challenging in 2010, and the impression is that things won’t massively pick up next year and we’re in for an economic rollercoaster.

the only way is......followed by a huge.......

The deal with Vow is up for renewal, and I make no apologies in saying that we are looking for that WOW factor in their response to our requests. Now is the time to recognise the massive support given by Office Friendly members over the last 2 years when things have been difficult for our key partner.

There are good signs of recovery from Vow, but the levels of patience have been tested with members and other customers alike as they have undergone a transition in their offering to the Trade. They are not alone and the opportunity for other distribution players and manufacturers to ‘get closer’ to independent dealers has been taken in some instances.

Over the last couple of days the wholesalers have held events, one a little furtively, and yesterday the other, Vow, presented a Business Practice Event. We excitedly await the real event to take place (only kidding, Adrian !!).

The streets go up & the avenues down

Despite traffic difficulties it was reasonably well attended and a chance to see the mindset of Vow going into 2011 and beyond. I was keen to understand their new furniture venture and learn more about their strategies for independent dealers going forward. Some of it still remains shrouded in mystery and with the launch date of Vow interiors fast approaching some work still to be done. However, it is adventurous in its ambitions and has the possibilities to finally solve a vexing question of why Wholesalers struggle so much with a product category that generates 10% of turnover and is an essential profit opportunity for non specialists.

furnishing leadership

So, from me it’s a thumbs up and a chance for the new partnership, with some steady old heads involved, and an exciting prospect of an orrsome new leader to take a new business model to market.

Speaking to a number of dealers attending the event the main noises about  service were lessened than in recent months and attention was turning to the price competitiveness in the market. Obviously we are in the throws of negotiation so that’s a must talk about with the OFDA members in particular.

We’re keen that Vow recognise our need to work in crucial new market areas with the possibility of generating new margin and profit opportunities, so it was encouraging to hear Adrian talk of development in key areas such as FM.

Some years ago, Vow (or Kingfield as it was) were innovative and ahead of the game by introducing a specialist in the marketing team to focus on FM. Lee Wright produced a fantastic effort and subsequently has moved on to great things with Slingsby’s in Bradford. With  furniture they seem to  have established a potential winning model based on recognising that true expertise lays outside of the skill set and remit of the wholesaler. You’ve either got to commit 100% to a project and put money into team development and recruit a true expert or play at it and fumble along. In the last 4 0r 5 years its been fair to say the wholesalers have been fumbling….

So in spite of growth by introducing new products from time to time and the odd (very odd!!) bits of marketing they have not addressed this category with any sense of purpose. Amazingly they both seem to have woken up and smelt the coffee ( top selling category line by the way) and realised there is a massive opportunity.

Let’s go and get it, and please lets either partner with experts or heavily invest in a quality team who know the market place.

So its back to the deal. Obviously this isn’t the forum to put a lot of information in place (psssst….we have ’outsiders’ who read this too!!) but the point is very clear. Now, is the time to set things right, and to clarify the position of Office Friendly as the KEY customer partner with Vow. Our members want this, and in many cases are waiting with real sense of anticipation that the words spoken at conference by Vow are followed through in action from January 1st. We ALL deserve a chance to move forward and buck the forecasted trends in 2011.

NO PRESSURE then boys!

Over to you Vow boys!!