Distributors selling direct to the public
With business conditions being challenging over the past few years retailers in the floor covering business are dealing with distributors who are selling directly to the public and over the internet. This is in addition to their normal distribution channels. This has become a significant problem for retailers who have made an investment to show these products in their showrooms. After all, the retailer has expenses which designers, contractors and individual customers do not. This means if they are allowed to purchase directly from the distributor they don’t incur the overhead and expenses that retailers incur and can sell the same product for less while still making a profit. The only problem with this is without the retailer’s help in making the product selection and giving the
customer the opportunity to see samples there would be no sale at all.
A normal retailer who purchases through distribution incurs display costs, individual samples costs, sales costs associated with the compensation paid to their sales professionals in addition to all the expenses of ordering, receiving, shipping and delivering goods. The retailer makes an investment of their valuable showroom space. If they cannot sell at an acceptable profit to cover these costs it doesn’t make sense to show the
product. Many distributors have tiered pricing which they use to justify selling certain individuals directly thereby bypassing the retailer who has in many cases has taken the time to work with the designer only to have the designer then go directly to the distributor to purchase the product for less than what the retailer is asking. The plain truth is that tiered pricing doesn’t provide the retailer with adequate protection of their margin.
For example if a retailer purchases product for $ 2.00 per square foot and retails it on their floor for $4.00 per square foot after selling expenses the retailer will be lucky to clear $ 1.00 per square foot or one half of their mark up. Remember that the retailer has to account for the time to market the product to the customer, work up the quotation including in many cases how many square feet are needed for the project and perhaps even prepare a drawing with multiple products being used together. The retailer is expecting to know how many feet come in each carton, whether the material is in stock and how soon it can be delivered. Is it fair that the designer can then take this information directly to the distributor and purchase the product for something less than the $ 4.00 that the retailer in charging thereby cutting the retailer out of the sale and in essence not compensating the retailer for their expertise and time in helping to select products?
While all distributors are not directly to the public, the fact is that a large number are. This only serves to reduce the value of the product and destroy the ability of the retailer to make a legitimate profit from their investment in samples and sales people. Presently in the Chicago market there are distributors that are not only selling to the public but advertising directly to them. Quite frankly I think it’s about time that retailers take a stand and agree to support only true distributors that sell through retailers and not distributor’s that are playing both sides of the coin. After all as a retailer we all know that too much distribution of a product only serves to take all the value and margin out of the product thereby making it unprofitable for retailers to sell.
Steven Lewis, Lewis Floor & Home
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