wholesale price wars

[bob s]

We do a large amount of wholesale for one franchise.In the last year one of our competitors has now aquired Chrysler , Ford ,G.M. , Mitsubishi and VW.They are giving extra discounts up to 35 and 36% if you buy all lines.Has anyone had to combat a situation as such before or currently are? What are you doing besides service and matching discounts? We lost a large bodyshop chain because of consolidtion of vendors and not because of service.How do fight that?

[Chuck Hartle]

Hi Bob,

In a word, patience! If you deliverd good service with a fair discount, then you have done all you can. A 35% discount with a 40% profit margin yields an 8% gross profit. If they can truly deliver good service with this kind of discount, they are an oddity.

Excuse the pun, but "A race horse that craps fast doesn't crap long". Patience is your only remedy. Work smarter, not harder, and never give into the these discount tactics. Wait until your competitor burns out or tries to adjust the discount structure upward and the chances are, you will get your customer back soon.

Chuck Hartle'

[jdaniel]

We've been on both sides of this dilemma. At one time we had seven franchises (mostly euro imports) and sold ourselves as a single source for parts. We never officially gave a larger discount for combined buying, but in reality we were more likely to bump a customer's discount up to the next level if we had all of their business. The problem we had was keeping four parts departments staffed with good people and running smoothly. Since we billed ourselves as a single entity, when a customer became dissatisfied with one line we sometimes lost all of their business.
Now we are down to three single point stores and we let the stores develop their own "personalities". We still have one Parts Director supervising the operations, and we still share a pool of drivers and trucks, but we let each store promote themselves as they see fit. It has been a bit liberating for the parts managers and hasn't hurt us, but the key is SERVICE. Whenever we have a new customer or a re-captured customer we do follow-ups to make sure that they are happy and stay happy.
One thing that we have done for many years which I believe makes a real difference in the level of service that we provide is we pay our drivers a comission based on total wholesale GP. Remember, the folks in the trucks are the ones who get "face time" with the customers.
As far as discounts, there are a few things working here- the first is fine print. We compete against a few dealers who give 35-40% off of sheetmetal only, but the discounts on any given order vary from 18-40% depending on the part. It doesn't take long for most shops to become frustrated with this kind of scheme. We've kept or recovered customers by offering simple pricing plans.
My second pricing observation depends on the manufacturer. Unfortunately, some manufacturers really encourage big wholsale operations at the expense of smaller dealers. The Chrysler line is a prime example, we compete with a guy who sells all sheetmetal at "cost" because he buys large quantities on the programs and therefore pays at least ten percent less than stock order price -and- Chrysler gives him deferred billing so the sheetmetal is usually sold before the dealer has to pay for it. That's tough to compete with unless you have the resources to go head to head.
I have found that dealers who are too aggressive often lose the ability to turn to other dealers for help. This seems to depend on the market, but even here we will trade at cost or cost +10 with local competitors unless they get too aggressive.
And finally, make sure you and your people are gracious to customers as they leave you, and as they return. Sometimes it's hard not to toss out an "I told you so" when a customer comes back with a tale of woe about the "new guy", but "we're happy for the opportunity to regain your business" will work better in the long run.
Godd Luck

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Jack Daniel, MCSE+I, CCNA
Systems Admin
South Shore Imported Cars

[AUTOMALL]

Hold the line!!!
I have had this happen several times. We are a small wholesaler ($125,000 + per month)
in a sea of large sharks. About once a year one of the "big boys" goes on a tear and tries to lure my very loyal cutomer base away. If you have been providing the service such as a smaller dealer can provide you will be alright in the long run.
We do not offer bigger discounts or talk bad about the dealer trying to steal our accounts, we just stay the course and offer the service that the customers need. Many of the larger dealers are only interested in the larger orders. When it comes time to send them that $2.00 part they need to finish the job and get paid they get overlooked. This will create the opportunity you require to get back in good graces. I also find that after a short period of time the discounts slowly go away. Keeeping your customers aware helps. In this atmosphere we have managed a 10% + growth every year for the past 5 years and no longer do we panic when the "big guys" start knocking on our doors.

PS: I also make it a rule to quietly shut off all business with the Dealer pimping my territory. Why should I help him? This also gives him one less reason to be in my area.

[tjsmith]

What I think really helps me in the wholesale business is SERVICE, but not only service but having a realationship with the Shops around town. I am a small dealer & I cannot stock a warehouse full of sheet metal or transmissions,I cannot out discount "The Big Boys", but what I can do is this; I know Birthdays, Weddings, Newborns, Funerals Etc...... I know when someone is sick & I do what I can! You would be suprised what a "THANK YOU" card would do for your business. And not some old business looking "THANK YOU" card...one that looks like you may spent an hour to pick out. Let them know you really do appreciate their business. May sound Mushy, but I do have the wholesale business in my area.

[John P.]

Bob,

Don't be fooled into believing that discount doesn't come LAST after service and everything else you offer. I drive 3,000+ miles every month, without leaving the area, to visit every single one of our accounts as often as possible. I do things like run reports to help an account get a handle on returns or hand type a customers monthly statement so that it's in a format he likes.

I have competitors that go as high as 37%, and I still win the business (given much less than that) because of the service we give.

If they leave because someone else gave them a better discount, I just keep visiting them and tell them that when they're ready, we'd like their business back. It's rarely more than 6 months before they leave them and come back for our better service.