By Karen R. Smith, WC&P Executive Editor
Meeting the competition
Dealers across the country have had to adjust their pricing and practices to competition from new sources over the past decade – notably big box stores and the Internet. While it is easy to differentiate the quality of service a traditional dealership offers its clientele, there are many consumers shopping for the best price, period. It is that customer who dealerships fear losing forever because of a low-price purchase online or at the neighborhood megaMart depot.
Rosemary Burch (owner of Burch Supply, Erie, Pennsylvania) hears these sentiments each and every day. She’s a UV supplier whose primary customers are dealers throughout the region; her husband is a professional geologist; he operates a well drilling business and also spends his days with water treatment professionals. “They all feel they can’t compete with those Internet and big box prices,” Burch said, “and that got me thinking.”
Of course dealers feel unable to rise to the challenge presented by these new competitors. Internet sellers have zero overhead because they have no health insurance or workman’s compensation or fleets to maintain. The big box stores enjoy economies of scale that average retailers can only dream about. Burch realized that such reasoning skewed the comparison…and came to a unique recommendation: dealers should simply meet the prices offered by those competitors.
At first, this sounds patently insane. Everyone knows dealers can’t compete at those price points. But that’s because they’re comparing apples and Volkswagens – the dealers’ service-based prices against the cut-rate product-only pricing of these new competitors. Instead, Burch suggests that dealers offer matching cut-rate, product-only prices for those ‘best price’ shoppers. Should they succeed in selling the ancillaries to that customer based on personal interaction at time of purchase, they can bill those ancillaries separately as a service charge.
For example, visit eBay and you’ll find five- and six-stage RO systems for sale, with shipping included, for $200. As a dealer, Burch suggests you match that Internet price for the price-hunting customer who will treat it like an Internet sale – no support, no service, no conversation of any kind – they will just pick it up, sealed in the box and go on their merry way. Why should a dealer match the Internet price? For an opportunity to personally meet and sell to that customer all their professional services and goods.
Normally, the RO price at a dealership has been set by including all sorts of factors – remember the forms WC&P ran last month that Gary Battenberg created? Everything from the cost of gas to the profit on parts to the amortization on trucks to the holiday and sick pay of the installer becomes part of the final price on an RO system. That’s the number folks are thinking about when they say they can’t possibly compete with an Internet seller.
Instead, strip all that data (and pricing) off the RO. Forget your normal markup. This competitive sale will just be a pass through. You will buy R Os from your supplier and pass it on to customers who will pull up at your dealership and hand you cash with the intent of taking the box and leaving, consuming none of your expertise and none of your services. The advantage for you is in the contact – this will be a local resident, seeking to solve a local water problem (which you are undoubtedly already familiar with) and the simple act of giving him your card – or the invoice with your contact info – may get you the service portion of that RO installation, and the maintenance contract thereafter. It might be an opportunity to sell them the dedicated faucet they’ll want to add to the kitchen sink once the RO is installed; or to get them to purchase a POE water softener, too.