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The opinions expressed in these blogs are the opinions of the authors only and do not necessarily reflect those of RV Industry News or its advertisers.
Feb
6
Written by:
Greg Gerber
2/6/2008 1:29 PM
News today that FreedomRoads and Featherlite ended their affiliation with each other draws attention to a theory I've been espousing for several months. That theory is that manufacturers and suppliers are fighting back against bullying tactics.
I'm not sure what caused the rift between FreedomRoads and Featherlite, and I haven't taken the time to find out, but it appears that both firms were fed up with each other. I make this statement because both companies fired off press releases almost simultaneously announcing they were going separate ways. Usually, when one company stops doing business with another, they simply stop ordering products or services. They don't usually send out press releases drawing attention to the problem.
I have talked to a number of suppliers in the past year who have told me they are being squeezed, threatened and roughed up by manufacturers, distributors and dealer groups alike. They are being asked to provide "the best price possible," in order to maintain their affiliation with the company or dealer group. That's fine. Negotiating the best price is the hallmark of capitalism.
However, once the best price is negotiated, the demands keep coming. The suppliers are then tapped for co-op marketing dollars, liberal return policies, exclusive distribution agreements, locked-in prices, free shipping and whatever -- all for the privilege of remaining a business partner with whomever is ordering or carrying the product.
Wal-mart deserves credit for developing this tactic. Companies wanting their products carried on the shelves of Wal-mart's 3,400 stores must jump through a variety of seemingly never-ending hoops. The company known for offering "low prices everyday," can do so only by securing the best prices possible. So, hungry suppliers must figure out a way to deliver goods at the lowest prices in hopes of selling tens of thousands of items.
It hasn’t always been that way. Sam Walton envisioned a retail company that could keep America’s assembly lines chugging building products for wholesale distribution to stores in small towns around the nation. Sam was all about helping American companies. Wal-mart was once known for its "Made in America" moniker. Wal-mart took pride in employing thousands of employees at its stores and, in essence, tens of thousands of additional Americans at supplier companies. When Sam died, so did his vision.
Today, the sad reality is that while suppliers are jumping through those hoops, Wal-mart is soliciting applications from 100 companies willing to offer the same product for even less money -- companies that are very likely located in foreign countries. Wal-mart's loyalty to its vendors is as thin as the paper upon which their marketing agreements are written.
What does Wal-mart have to do with the FreedomRoads/Featherlite split? To me, it signals that manufacturers and suppliers are tired of being bullied by retailers. In the RV industry, suppliers and manufacturers know they have products in which consumers find value and their business partners can make money selling. But, if the suppliers are not going to receive valuable financial consideration for their product (i.e. reasonable profit), then they might as well sell fewer products.
After all, if a company can generate the same profit on 1,000 items as they can by selling 1,500, why do all the extra work and put up with the additional headaches?
I know Featherlite is not the only company to tell FreedomRoads/Camping World to hit the road in recent months. But, if that conglomerate and other venues representing or servicing scores of dealerships continue to put the squeeze on its vendors, the industry will wind up with beautiful stores that have few items on the shelves and even fewer RVs on their sales lots. Or worse, we’ll wind up dealing with foreign companies with sales offices in America rather than service centers.
Dealers will be quick to point out problems with product quality, warranty processing and the like, and suggest that their vendors need to address those concerns in order to justify higher profits. Those remain valid concerns. But, from a practical viewpoint, it is impossible for companies to supply products at rock bottom prices without skimping in areas like product quality and service.
For the same reason dealers are upset by large Internet sellers putting the squeeze on retail profits, the same argument can be made by suppliers and manufacturers that dealers must allow them to make a reasonable profit, too.
This situation leaves me wondering whether the global marketplace has eliminated the old-fashioned business value of creating win-win partnerships simply to get the best short-term profit possible. Keeping pressure on suppliers and manufacturers to operate on laser thin profit margins is simply unsustainable. And the firms are starting to fight back. It’s become a matter of survival.
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11 comment(s) so far...
Re: Manufacturers and suppliers fight back against bullying tactics
There's a much bigger picture here than is being portrayed in this blog. Many suppliers bring this situation on themselves by seeking out only the largest players and refusing to open accounts or work with small players? They help the big get bigger and then don't like the results. Give me a break; they bought their volume with prices cuts and exclusive contracts. The deck is stacked against innovation and small businesses trying to grow. Sorry, but the term "bully" is simply a matter of perspective that gathers no sympathy from this computer.
Steve
By Mobility RV Service on
2/6/2008 3:19 PM
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Re: Manufacturers and suppliers fight back against bullying tactics
How many times do we have to listen to this tune? There is enough blame to go around for everyone here. I'll take ten small dealers to one large mega-dealer any day of the week. I'll take a handshake and partnership over a contract and litigation every time I do not understand the self-defeating business practices of many companies in this industry. Instead of building lasting relationships built on value, fair profit and trust, they can't wait to see who will be first to use, abuse and sue the other party. There are excellent manufacturers and suppliers out there and there are some really great dealerships that know how to take care of their customers and engage in fair business practices with their suppliers and the companies they represent on their lots. What I dont' understand is all the others that are the profile of what Greg has described above. The answer to these problems and challenges is right in front of you in the mirror. Have a good talk with yourself when you are shaving or putting your makeup on tomorrow morning.
By Bob Zagami on
2/6/2008 10:27 PM
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Re: Manufacturers and suppliers fight back against bullying tactics
This is growing in to a huge problem in the RV aftermarket. As competition becomes more fierce, driving MSRP prices down, finding good partners in business becomes tougher. This is a great article and reaches a problem that will get worse, before it gets better. We lost a huge supplier because we would not agree to the bullying tactics that were proposed. It will be very interesting to read future articles on the trend on this type of 'selling.'
By Craig Waugh on
2/7/2008 12:33 PM
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Re: Manufacturers and suppliers fight back against bullying tactics
It's the Wal-Mart story alll over again. First you are really glad that a major retailer has decided to carry your product. Two years later you're wondering what happened to the bottom line, or worse, who's really running you're business. Making more money always trumps doing more business.
By Mark VanOstrand on
2/7/2008 1:53 PM
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Re: Manufacturers and suppliers fight back against bullying tactics
This is a little off dead center but it does have to do with manufacturer's tactics. Many of the manufacturers are paying spiffs directly to the salesperson for selling their products. And these are not little spiffs but rather large amounts $2000.00 or more. So from a salesperson's point of view it's guaranteed pay. Which products are they going to push or try and sway the customer to buy. This is costing both sales and inventory issues. The dealer is losing control over managing the inventory and maintaining a realistic gross profit. Might make a good blog topic.
By Tom King on
2/21/2008 11:09 AM
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Re: Manufacturers and suppliers fight back against bullying tactics
Tis time for RV dealers and suppliers to grow a set @@@ and step up to the plate.
We go into Walmart and see top Ten items on shelf, true they are not cheaper than the RV stores, however, the consumer will buy a bottle of deodorant or prehaps a hose - THAT IS IT. Should we get them into our store, they have a chance to look and prehaps see a new RV or more supplies. Manufacturers remember--we are the boys that brought you to the dance. Also, in light of this--the RV wholsales on line are whor-- up the market---Leaving the ultimate consure without adequate service, pre-delivery etc. Forest River has taken a stand on this, now its time for all the others to step up and protect the local dealer.
By BUZZ BRODY on
2/8/2008 8:55 AM
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G.M., Camping World RV Sales, Statesville, NC
Freedomroads and Camping World have done more to promote our industry in their short existence than any other entity to date. Through strategic partnerships with manufacturers, suppliers and campground affiliates we have strengthened our position in the marketplace to better serve the customer. If making good business decisions based on a prospective partner's financial viability is a bad thing, someone needs to re-write every economics textbook being taught on college campuses everywhere. One-stop shopping is a convenience for active RV enthusiasts and for that we make no apology.
By Frank Le Noir on
2/8/2008 10:23 AM
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Re: Manufacturers and suppliers fight back against bullying tactics
Camping World and Freedom Roads don't owe anyone an apology or an explanation. They are working hard to define a new business model for RV dealerships and sales centers. We'd expect that there would be some unique circumstances or issues that go into transforming what was once a group of independent RV dealerships into a single corporate structure. The point of this blog post was to highlight what appears to be a growing frustration among manufacturers, suppliers and dealers over the tactics being used by some companies to strong arm their partners. I hope I didn't come off as being critical of Freedom Roads/Camping World. It's that the the breakup with Featherlite came down in such a way with both firms issuing press releases announcing the decision that I surmised an extremely high level of frustration must have been present with both firms. Dealer groups are putting the squeeze on manufacturers to obtain product at dangerously low prices to the point the manufacturers may not have enough profitability to fund research and development, or weather a downturn in the market. On the other hand, manufacturers are putting the squeeze on dealerships to take more inventory than the dealer lots can absorb. They are doing this under the threat of moving lines to other companies if a dealer doesn't maintain a certain stocking level. So, to prevent losing brands to competitors, dealers have to floorplan more units than they might be comfortable in doing. That, in turn, reduces profitability to the point they can't invest in infrastructure, training, service, etc. Suppliers are involved, too, because they are squeezed from dealers, manufacturers and distributors. Right now the entire RV industry is in a giant financial vice. The point of this blog was to highlight what appears to be a nasty trend in which dealers, suppliers and manufacturers are at odds with each other as all entities attempt to maintain unrealistic profit levels to satisfy stockholders and equity partners. If I came across as picking on a particular entity, I do apologize because the issue transcends whatever happened between Freedom Roads and Featherlite. They were simply a convenient example of what appears to be happening throughout the industry. Because, based on my conversations with suppliers, manufacturers and dealers, the issue of employing strong arm tactics appears to be more widespread than I fear some would care to admit. And there is enough blame to go around that no one entity or sector should feel totally responsible.
By Greg Gerber, editor of RV Industry News on
2/8/2008 11:11 AM
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Re: Manufacturers and suppliers fight back against bullying tactics
Your opinions on Freedom Roads are totally distorted. I have seen first hand how hard they work to assist manufacturers whom they have relationships with. They have done more to assist, create good will, and help key manufacturers than any dealer base would consider. It is fear that prompts this type of rhetoric. I hear all of this about the 500lb gorilla; I think a better correlation may be King Kong. Freedom Roads is large, but carries key manufacturers in the palm of it’s hand keeping them safe, cherishing them, and ensuring mutual success.
We would never be allowed to do business the way these articles continue to portray. Please consider both sides of the story. Having read many of your articles previously, I do not think you want your publication to sound like the National Inquirer of the RV industry.
By Justin Matos on
2/9/2008 1:14 AM
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Re: Manufacturers and suppliers fight back against bullying tactics
Dare we hope that manufacturers recognize that dealers have to operate that way as well. Volume does not always equal profit.
By An RV dealer on
2/11/2008 8:32 AM
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Re: Manufacturers and suppliers fight back against bullying tactics
Now Greg.....does the dealer have control of what components are built into a coach? No. Does the dealer set the warranty policies and procedures? No. Can the dealer fix a problem and get reimbursed without the manufacturer's approval? No. Can the dealer ask that units they receive be built only on Tuesday, Wednesday or Thursday...eliminating the "problem Monday or Friday coach? No. Can a dealer set the cost of a coach? No.... Do you see a trend??? How can you think the nasty 'ol dealers are picking on the suppliers and builders?
By Bill Miller, Courtesy RV on
2/12/2008 8:50 AM
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