Fair Market Practices Elusive

Published on January 1, 2011

[img:1] My name is Bettyjean Kling, and I’m mad as hell and am not going to take it anymore.
I sell retail pond supplies online at www.pondarama.com from a rural location in Pennsylvania, and have been in business for over six years. (I was a special education teacher in another life.) I’m open 24/7, offer extensive customer support and publish a regular newsletter, which I distribute electronically. I maintain a product inventory level slightly below 50K to service local customers, and my loyal distributors dropship everything else for me.

Like many others in the pond industry, I find it very difficult to make a living with profit margins shrinking at such a fast rate. While competition is healthy for all concerned, and usually benefits the consumer, unfair marketing policies practiced by a few greedy, short-sighted companies threaten to put a number of retailers and distributors out of business, if this practice becomes widespread enough.

Basically the problem is that a company with indiscriminate or non-existent sales policies will sell to online retailers at distributor prices! Distributor pricing is designed to provide an intermediate marketing level between the retailer and manufacturer. The distributor is expected to stock a manufacturer’s product (in large quantities) for immediate purchases by dealers and retailers, employ salespeople, and to provide a level of customer support. There is an extra price margin between a dealer/retailer price and a distributor price to cover this process. Unscrupulous companies who will sell to almost anyone at distributor pricing, abuse this process, and make it difficult for those of us who do play by the rules to make an honest living.

What normally happens is that a weak salesman or sales manager will give an online retailer distributor pricing as a reason to buy. The etailer will then use that extra margin, not to increase his profits, but to further discount the product (often at a little over his cost) in order to try and gain more market share. This situation has several undesirable effects: it tends to devalue the product and turn it into a commodity, just as pond liner has become in the last few years. It gives these etailers an unfair market advantage over other retail competitors who have to buy at dealer cost. It cuts the distributor out of the loop because the etailer will usually sell at wholesale pricing, or even lower to consumers. This cuts out the distributor’s dealer customers altogether. In other words, the product now retails at manufacturer’s wholesale prices, which actually reduces the market value of the product, as well as its marketability.

Some may say that this is just the free market at work, and I suppose it is. Distributors and retailers can exercise their version of the “free market”, too, by not buying products from manufacturers who intentionally devalue their own products, turn them into commodities, and create unfair, preferential pricing for some customers, at the expense of others. I’ve heard that the consumer ultimately wins from this situation, but that theory won’t hold up either. When an etailer buys products manufacturer-direct at distributor pricing, offers free shipping, and sells retail at just above their cost, then just how in the world do these slim margins finance any customer support or service?? They don’t, and that’s the problem. Ponds are still an intensely service-driven enterprise, with consumer knowledge on a very low level. If you look at the companies in the pond industry who offer the best customer support, you won’t find a single one which operates on razor thin margins. It can’t be done, so the consumer actually loses in these price wars, which hurts the industry, rather than helps it. Everyone loses—even the manufacturers who are cutting their own throat.

I have made a lot of noise about this issue on my website www.pondarama.com and forums and I am starting to become noticed in the industry. A couple of distributors who are publicly helping me to agitate this issue, have already been told by certain manufacturers to stop working with me or their buying privileges will be cut off. I’ll give those manufacturers a message right back: “Stop selling at distributor pricing to those retail companies who are devaluing your products, and making it impossible for the rest of us to compete, or we’ll ALL stop buying your products!” The “free market” cuts both ways.

Of course not all manufacturers are guilty of this, and there are a number of responsible companies who are trying to preserve the integrity of their products with programs such as IMAP and MAP programs, and who practice fair pricing policies. Minimum Advertised Pricing is not the complete answer to the problem of runaway pricing issues, product devaluation and commoditization, but it is a start. These same companies usually have firm sales policies in force, which govern eligibility for distributor pricing.

And sometimes during all the heated debate, something really funny happens. A few weeks ago, a CEO for a well-known West Coast manufacturer wrote a letter that was very critical of my efforts, and he referred to me in a very uncomplimentary manner, too. But instead of sending it to his sales rep, he accidentally e-mailed it to me. Hee, hee. I posted it on my website, and everyone got a good chuckle from that.

There are also several legitimate distributors who retail online, but who do not sell at price levels that make it impossible to compete, so we patronize them too.

I would like to urge all distributors and retailers to only buy from those manufacturers who set up a fair and level playing field with regards to price, and to boycott those who do not. I would like to thank all of the manufacturers, distributors, retailers, magazine publishers, and others who continue to help me in my efforts. We are making progress.

Author Contact Information:
Bettyjean Kling
9895 Mc Creary Road
Shippensburg, PA 17257
Tel: 717-532-7212
Fax: 717-532-4411

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