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Oh Those Dealers!

Dear Stephen,

I am a regional manager for a major manufacturer. I am not sure if you've heard about this occasional tension between manufacturers and dealers, creating a cause of frustration for sales management and irritation for our sales reps.

Often times when one of our dealers wins a bid from an RFP by bombing the prices and beating their fellow dealers by giving a crazy low price, they circle back to us with some excuse as to why they should get an additional discount. This is after the order has been awarded to them.

All dealers participating in the RFP, of course, receive the exact same discount from us; that's just the rules-of-the-road for every manufacturer. And it's standard Robinson-Patman Act regulations. It's then up to the dealer to mark it up enough so that they can provide top-notch service and make a reasonable profit.

Here is a new twist happening to us with certain dealers today. The dealer who won the project comes back to us, and they claim, "the client" has tasked them (the dealer) to now "value engineer" and re-price the project. Even though the project was already awarded, they expect us to believe that the major design firm that specified this project, along with the client who awarded the bid, suddenly wants to cheap out on their design.

As far as this request from the dealer, we have our doubts if it is true, but want to help with a solution for the design firm and the end-user. The resolution for us to the "value engineering" with our own product that was on the bid may be to suggest to the client a finish, or maybe a different edge treatment or even chair leg color. If you start to dig into the details, there's lots you can do to reduce the price of a product while keeping the overall look the same (of course often the quality won't be the same).

Then when we offer these logical alternatives to the dealer to reduce the price, they rebuff the suggestions and instead continue to threaten that they must value engineer our product, on their own, to come up with an alternative, still lower, pricing. On several occasions when large teams work on the project, there's even more confusion because one person tells us that the order will be placed shortly – with no changes - while another tells us that without an additional discount, they will have to VE our product.

Then, this whole process may come to an abrupt halt, because it's at a point where the dealer must tell the architect they are meddling with their design and product specs, and chances are the end-user may know nothing about it. To us, it seems like the whole charade is simply a dealer scam to squeeze more discount out of us, because they bombed the job.

So now we look back and, in my opinion, we've all just wasted our time. We had a fair bid process and all the other dealers lost the bid to the lowest bidder who is now scrambling to try to increase the Gross Profit by whatever means necessary. With no results.

I respect our dealers, they are out there selling our furniture, and they do a good job of it. And, we are a major line, not a second-tier manufacturer, so the dealer really is our partner. And I bet that there are times when a client may have second thoughts over pricing after awarding a bid, but I think that is rare and would I doubt would happen without the dealer prodding. I just wish the VE story wasn't used as a smokescreen to eke out more profit dollars, once you have been awarded the bid.

Well Stephen, do you have any advice?


Love to Hate those Dealers


Dear Love/Hate,

First, this is a workplace column dedicated to questions from employers and employees alike, asking questions related to their job or hiring. I printed your question, which normally does not belong in this space because it's off-topic for me and doesn't line up with my expertise, so we can see if other readers have heard of this, and it gives an opportunity to both dealers and manufacturers to tell us what they think of this topic.

Now, Mr. Love/Hate, you realize you are biting the hand that feeds you. Meaning your company may have won the order and beaten another manufacturer because your dealer bombed the bid and took an order at a low margin.

It's clearly unethical to offer different dealers different discounts, and I think everyone understands that. And especially AFTER a bid has been awarded.

I like that you're calling the dealer's bluff about the limits of value engineering and taking me through, step-by-step, what happens and how it ends as a process with no apparent success. And it seems like all this goes on without the client or design firm even being aware of it. It's a great story, if what you are saying is how this happens.

I will say, I try to avoid printing stories that contain what I call "dealer bashing". We receive so many of these letters in this column from anonymous manufacturers' reps, anonymous salespeople that work at dealers, and anonymous design firms that work with dealers that can be defined as pejorative to dealers. If your story is even half accurate, it seems not only as a waste of time on the part of the dealer but a waste of their goodwill with the manufacturer that keeps them in business.

I am publishing your letter as an open dialogue to hear if anyone else knows of a story like this. A dealer bombing a bid to land a project over the competitive dealers, then trying to fake out the manufacturer for any reasons that are not true to get more points. Is it a real thing?

So I ask you, my loyal readers, who love to "comment", if you are from dealers or manufacturers and everywhere in between, does stuff like this really happen? Let me know your thoughts: "Go".