Some Jobber’s React with Threats and Accusations
It is important to clarify that not all paint companies nor Jobbers use deceptive pricing and unfair trade practices. Some do and they are the point of this article and my last. Jobbers that provide a valuable and fairly priced product and service are great partners for body shops of all sizes. Good Jobbers are critical links in the current distribution model and will have a lasting place in the changing market in the future. On the other hand, businesses that are using unfair trade practices and deceptive selling tactics to fraud unknowing shops should have no place in the future of our evolving collision repair industry. Price fixing, double sheeting, and lying should have no place in an industry of excellence. And, if the shoe fits, wear it. If not, rejoice that someone is exposing another industry dirty little secret that gives us all a black eye and bad reputation by association.
My last blog in September about the revolution in paint distribution in this desperate market has created a firestorm of angry reaction. There has been many conversations between jobbers and a few paint company people and consultants that are expressing their thoughts and opinions on what we are doing. Frankly, it boarders on conspiracy to restrain trade based upon the efforts to stop us from helping our Co-Op Member shops negotiate better paint deals. The conversations have been filled with arrows and knives pointed at my back for my comments about unfair trade practices employed by a few rouge jobbers and some manufacturers. I set off the alarms by describing how independent shops are finally flexing their buying muscle to get competitive discounts on paint. See blog posting: A Revolution In Paint Distribution, September 2009
My point then, as it is now, is that independent shops should have the right and opportunity to negotiate deals just as consolidators have as long as they represent the same purchasing opportunity. I explained in general terms how we are doing it and how important the improved profit margins are to the survival of our shops. Assured Performance Co-Op is looking out for our Members and doing all we can to ensure they get a best price and best deals …within reason.
We are buyers hoping to purchasing paint at the best possible terms. We created a “volume buying” group to buy paint at discounts comparable to what large MSO and consolidators have for the last 10 years. And, for the record, we have always invited multiple paint companies to bid for our business in each market. We are following the pattern set by Consolidators in the collision industry and 30,000 other cooperatives across the US in all other industries!
The disinformation campaign and assertions some are making about our efforts are not only wrong, but hypocritical, too! One self-proclaimed “Expert” that shared his opinion suggested we and any paint manufacture that offers us highly competitive price are trying to use “predatory pricing.” Laughable! There are dozens of examples where consolidators have been able to get far deeper deals than we have thus far. And, lets not forget how much money paint companies and jobbers paid into consolidators like M2;. That was MILLIONS and over 10 years ago!
Wikipedia defines predatory pricing this way: “In business and economics, predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors. If competitors or potential competitors cannot sustain equal or lower prices without losing money, they go out of business or choose not to enter the business. The predatory merchant then has fewer competitors or is even a de facto monopoly, and hypothetically could then raise prices above what the market would otherwise bear.” That is exactly the opposite of what we are doing!
For the record, Assured Performance does not set the price for anything. We offer paint companies the opportunity to sell more of their paint by presenting the best “deal” to our Members. Collectively, our Members represent a huge buying group purchasing hundreds of millions of dollars in paint! In fact, the Co-Op is designed to allow our shops to be competitive with consolidators and others that have negotiated effective discounts two or more times better than the independent. These competitive consolidators have gained these far better prices while the independents have not been offered the same deals giving the consolidators a far greater profit advantage. This is an unfair trade practice. We are helping make it fair once again.
We discovered in far too many cases the shop were being lied to. As an example, the shop was told they were getting say, 30% off. When we audited real invoices and compared them to list prices, we discovered that they were really getting 10% or less because a different list price was substituted! These shops have been double-sheeted for years and lost out on hundreds of thousands of dollars of profit! I was told by one long-time paint expert that the practice has been going on for decades and many jobbers still follow the practice of using their own price list. He contents that they don’t see anything wrong with it as long as their shop customer is willing to pay the bill. Ok, and there is nothing wrong with us educating our Members to be a far more informed buyer, either.
Change is challenging for us to deal with especially when it is forced upon us. The concept is illustrated well by the book, “Who Moved My Cheese?” by Spencer Johnson published more than a decade ago. It is even more relevant now. We can all understand when a jobber reacts to this change in the distribution channel that threatens their profit model. However, as we are faced with another recession and the related economic challenges, everyone is looking for a way to retain market and profit. Buyers and sellers will change what ever they have to in order to stay alive. The paradigm shift that occurs during recessions and periods of business evolution usually aim at eliminating waste and inefficiency. Too many unnecessary layers in a distribution channel creates inefficiency and waste. In nearly every other industry, the distribution chain was refined in the last few decades. Now, it is coming to the collision repair industry. Just take note of what is happening with auto dealers.
More and more shops and groups of shops will buy directly from a manufacturer of some product – paint, parts and everything else. All of the manufactures are talking about it, but usually behind the scenes. As the industry evolves towards this model, the middle man will be cut out or at least mitigated to a degree. “Direct Distribution” models are already a part of the collision repair landscape. Jobbers and paint manufactures will have to evolve even if they don’t like it …that is if they plan on being part of this fast-changing market-place. Blaming someone else for the change and the jobber’s woes is irresponsible. Just as we tell our shop Members, all of us must assume the responsibility to make ourself relevant in the trading process of the future or we will be eliminated.
Consider this quote from Shakespeare’s Julius Caesar (I, ii, 140-141): “The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings.”
Jobbers can be highly valued partners in the future, but not if all they are is over-charging can kickers and an inefficient delivery service. Those that have built a business that is relevant and valued partner have little to worry about. Those that are evolving as the market does can look forward to a promising future. Those that think they can continue to keep the shops in the dark, lie to them, doctor price lists, and strong-arm the shops into accepting overcharges and monopolistic price fixing are headed for a well-deserved end.
The broad brush strokes of my article may be too wide and unfairly insinuate all jobbers and paint companies are bad. That is not my point at all. There are many that are great friends and partners to their shop customers. And in many cases, shops could not survive without the help of their jobber. There are many jobber organizations – large, small, multiple and single – that are great partners to their shop customers. These valued businesses conduct business above board. We have not seen one irregularity in their billing and the postings they do for their shops to get a rebate. There are also several top notched paint companies that are willing to do the right thing and regularly lead the charge to help shops.
The worse part is that everyone knows about these bad business habits, but say nothing publicly. When I discuss the fraud and unfair business practices we have found as we have begun to roll out our paint purchase program across the US, everyone’s eyes roll and heads shake. Off the record, they all tell me horror stories from every corner of the country. Sadly, it seems these bullies and their unfair trade practices are just another collision industry “dirty little secret.” Isn’t it time we clean it up? Isn’t it time to separate the good guys from the bad guys? Isn’t it time someone pointed out that the emperor is naked?
Why aren’t jobbers evaluated according to standards and given ratings? Don’t most quality manufacturers really want honest and decent businesses representing their products? Surely this too has not degraded to the point that standards and morals are immaterial as long s someone, anyone, is selling! We have a chance to do better. Why not?
And, before anyone gets offended, please consider if the shoe fits or not. If these practices don’t reflect or represent the way you do business, here is your chance to make sure everyone knows it. Let them know there is a difference between you and them. Use this as your marketing advantage. Rise above it and let the damnable be damned.