"Dealers a Necessary Evil? I Think Not"" - 08/11/21 Edition
Stephen Says Column

Dear Stephen,

I am the VP of sales for an office furniture manufacturer. I want to keep the size and location of where I work anonymous because the company I work for is known for the legendary loyalty to our dealers. We say the dealers are the cornerstone of our brand. We say a lot of things.

The reality is very different. Most of our salespeople across the country, in the field and most of us here at HQ loathe our dealers and think of them as a necessary evil. We think of our dealers as bullies who rarely make an effort to get our product specified (we mostly do the heavy lifting in getting on an RFP) but they want to reap the rewards of a project.

They do this by low-balling an RFP. Then they nickel and dime us to death over the margin they make. This is because they price the job too low, just so they can land the sale with no thought as to what they need to make to run their business and complaining to us, the manufacturer, because they cannot survive on a 6% margin. Who told them to mark it up 6%? They are expecting us to take a haircut because they do not know how to price the project to make money.

This is true in markets big and small and every dealer big or small. The bigger the dealer, the bigger the bully they can be. Some of the largest dealers at the largest manufacturers are the most disliked at corporate. This is not my isolated opinion — you can ask any sales rep or regional manager in the field what they think of their dealers, and you will get an ear full.

Here is the funny part which makes the dealer have the last laugh: Many of these same dealers are smart enough to hire away senior talent from the major manufacturers they represent. Why? Dealers can give these people from fancy manufacturers way bigger paychecks. I do not blame my colleagues for making the switch — we call it, going to the dark side.

Dealer principals are paying these former manufacturers people for access — yes, access to the information; to the keys to the kingdom. These former manufacturers' leaders who are now at a dealer help with entry for the dealer to get to the right people at corporate headquarters. Who knows it better than some big shot who worked there? So the dealer owner hires the guy or gal they were complaining about a year ago from when they were at the manufacturer and is now doing your bidding with that manufacturer because that dealer owner was smart enough to offer them a big fat check. Hey, the dealer owners may not be that nice, but they are not stupid!

Here is one of our main complaints of a manufacturer: Dealers try to make up for the monies they think they lost on an order through chargebacks to a manufacturer. Chargebacks are the often insane fees dealers use to punish a manufacturer for service issues that may occur later. And they always do.

Chargeback, chargeback, chargeback seems to be the dealers' worst kept secret to try and increase their margins, to make up for the discounts we did not give them because they poorly priced a job. Dealers need to realize they should not be afraid to price jobs fairly for themselves to make a profit. As manufacturers, we resent these outrageous chargebacks and now follow them very carefully. We consider chargebacks when we evaluate dealer performance and when we move forward to decide who should stay a dealer and who should go.
 

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Stephen Viscusi is a bestselling author, television personality, and CEO of The Viscusi Group,
global executive recruiters located in New York.
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