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| About Us When you are choosing a supplier, you don't care how long they have been in business, how many people they have, or what they think of themselves. What you really want to know is what they can do for you and what makes them different from the rest. With those thoughts in mind, we have prepared an overview of our thoughts on doing business that may be a little different from those presented by our competitors. It takes a few minutes to read, but we think you may find it to be of interest. Thanks for visiting with us! Some thoughts about business....... The beginning of the end for free enterprise can be predicted with a fair amount of accuracy. It goes something like this. Everything works well until the marketplace is opened to discounters. The Carnegies, the Morgan’s, the Rockefellers, and the Vanderbilt’s understood this well. Corporations like AT&T, GM (who wrote the book on controlled distribution), Microsoft, the railroads, and the power utilities understood the concept – still do! In an effort to keep low cost competition out of the marketplace, they set prices and established rules that shut out competition. It worked pretty well until government moved in and set up anti-monopoly and anti-trust regulations such as the Robinson-Patman Act, the Sherman Anti-Trust Act, and other regulations designed to control business.
Some of us remember the price fixing cases where major corporations got together and decided to hold prices at an agreed level. Our government decided this was illegal. It got so bad that competitors were afraid to have lunch together. It’s good to have government looking out for you, or is it?
The fact is that our economy prospered well under these robber barons and price fixers. Unions were allowed to develop, and the American standard of living became the envy of the entire world. We had a good railroad system a great air transportation system, the best telecommunications system in the world. We had virtually no reliance on foreign natural resources, and then, things got “busted up” for the good of the people. Today, AT&T is a shell of a once powerful technological giant. Our airlines are a joke, we have second-class wireless communications services, and the rail systems in even third world countries are MUCH better than ours.
So we know that big is not necessarily bad with one exception. When large corporations and government combine forces for the good of the people, it is a disaster! So what does that have to do with discounters?
The problem with discounters is they open the door to the Mega Sellers. Here’s how it works. When new products are introduced, there are generally a few select resellers who maintain good profit margins because the market demand is high and distribution is limited. Want an example? Take a look at the Apple I-Phone. This is a classic model of a free enterprise endeavor where no one suffers and all participants are satisfied. Apple workers earn good wages, and the corporation earns good profits which are partly returned to their stockholders. The single carrier allowed to sell the product has no competition and the price is set at the level consumers are willing to pay. The government earns more tax revenues on a high tier product and everyone is happy. Then what happens?
The typical story is that a plan is developed to address the secondary market. In the case of Apple, it would logically mean releasing the I-Phone to other carriers such as Sprint or Verizon, then maybe later to Nextel and T-Mobile. As these other carriers are introduced, price competition develops, first among the carriers, and later by the resellers. In the process, the resellers are the first to go. One lowers the price, another matches the price, and pretty soon, none of the resellers are making a profit. They then can’t pay their bills and ultimately go out of business – but the story doesn’t end here. Then, along comes a Mega Seller like Best Buy, Lowe’s, Radio Shack or the king of them all – Wal-Mart!
As the little guys kill each other off with such brilliant business models as My company has the lowest prices anywhere, nobody ever beats our price, we will not be undersold, etc., the product passes the peak of it’s life cycle leaving an overabundance of resellers competing for a declining market. To make matters worse, the manufacturers are having their problems as well.
The knee jerk reaction of many manufacturers facing declining sales is to do one of three things – maybe all three. The first is to lower price. Since most business is conducted on the basis of percentages, the gross margin for everyone in the distribution chain suffers since not only has the value of the product been lowered, but the profit margins as well. Next, the manufacturer will increase distribution – sometimes by creating additional channels (i.e. sales outlets specializing in sales to specific user groups such as recreational, business, public safety etc.).
Somehow, most manufacturers conclude that sales would improve if they simply had more resellers (dealers) in the primary channel,. So, they either cut back the sales territory of existing dealers, put additional dealers in on top of them, or both! Now, we have MORE dealers selling in a declining market, competing with specialized distribution channels and about the time that you would think things couldn’t get any worse – they do!
You’ll recall that I said there were THREE reactions by manufacturers with declining sales revenues. We won’t even count downsizing. This has been proven time and time again not to work. It comes in as number two to outsourcing. We all know how efficient it is to be handed off to some guy on another continent who barely speaks our language when we need help.
There is another type of outsourcing more commonly known. This is the practice of moving manufacturing jobs to a foreign country where labor rates are lower. This is a very popular business model these days. However, it has a flaw – as more and more Americans lose their jobs, our available income for goods and services goes down. Fewer people with well paying jobs means less goods and services consumed. Let’s go back for a moment. We kind of skipped over downsizing.
There are three kinds of downsizing. The first is to fire those who are not union protected or vested in an employee benefit program. You let them go, they draw unemployment for six months or so and they are on their own. They’ll be OK. They can always find another job…. We’ll come back to this shortly. The second type of downsizing is to provide a golden parachute in the form of a cash settlement. This can be a good deal if the employee is at or nearing their golden years. The benefit to the company is questionable. For a year, two, or three, the company is paying full wages without getting the work effort of the missing employee. The jury is still out on this one!
So what’s the third type of downsizing? This is the cruelest of all to the employee. The company fires, retires, or reassigns you from employee status to private contractor status. In a nutshell, this means you work without benefits. The work hours have to be reduced so the employer doesn’t run afoul of the wage and hour folks. The bottom line is that the employee gets less income and no benefits for doing the same work!
Remember our first classification of a downsized employee – the guy or gal that was cut loose to go on unemployment? Did they find another job? Sure they did, at eight bucks an hour and no benefits. Do you think reducing income by half or more has any impact on our economy or how many widgets we sell, or the taxes that are collected, or the maintenance of our infrastructure? Did you know that our average bridge and sewer line is over 100 years old? Have you looked at our railroads lately?
Now the question that has to be answered is do these employers do these things because they are mean, stupid, or forced to take such action as the result of external influences? The answer is external influences over which they have no control and IT’S ALL CAUSED BY DISCOUNTERS!
Let’s review how this happens – In the beginning, the manufacturer introduces a new product that is needed, wanted, and can be afforded by a sufficient number of people to make the effort worthwhile. Then the manufacturer chooses those who will help bring the product to the market. We call these people Partners. A Partner is something like someone who purchases stock before a company goes public. They are the in crowd. Their objective is to team with the manufacturer for mutual success. A little later, we bring in the foot soldiers. We call them resellers or dealers as you choose. While things stay tight, everyone makes money. There is no reason to discount.
Next we move into the mature market stage. The manufacturers stockholders are clamoring for more profits. Suddenly, the reseller finds that he has company in the form of other resellers. There are so many of them coming from so many channels, that he may be unsure as to who they all are, but he REACTS in one of several ways! Sometimes, the reseller will increase sales manpower, advertising, or both. Ultimately, the reseller learns that he is spending more and selling less. So, the next step is to meet the prices of those dirty low down, stupid, discounters. He’ll show them!
The problem is that at best, the reseller is not buying at a better price than the competition. In fact, he may be paying MORE than the competition. In either event as the war wears on, there will be casualties. Some of the brighter resellers will go out and get some venture capital and build a sales network. It stands to reason that Big Communications Company with their enhanced buying power will ultimately prevail over Mom and Pops Electronics. However, the logic doesn’t work because Mom and Pop are fighting for their life. In the process of trying to defend themselves they may drag down their larger competitor with them. So then what happens?
As we said earlier – it’s not over yet! At this point, one of two things happen – the manufacturer cuts a few deals with big name retailers to handle consumer sales while simultaneously forming an internal sales group to handle large system opportunities. So what about those original partners and resellers? They are GONE! What you have left is the manufacturer and the Mega Seller. Now – would you like to guess what happens to the price now? Do you think it goes down? You KNOW better than that!
So who or what caused the whole problem? The one who extended the first discount! If everyone had continued to sell at a fixed price, on a level playing field, the manufacturer would not have been forced to add distribution channels, downsize, outsource or anything else except to continue to provide continually improving products built in the USA by a well paid (and cared for) labor force. The Partners would be reaping the benefits of their early participation in the endeavor and the Resellers would be making plans to take their business to the next level. More people would be employed, making higher wages, and consuming more products. More taxes would be paid and our government could go about the business of rebuilding our critically decaying infrastructure. All of that would be possible except for one thing – THE DISCOUNTER!
Do we welcome the Supreme Court decision to allow manufacturers to set a minimum selling price? You bet we do! It’s been working very well for the diamond industry for many, many years, and we believe it can work to the benefit of all Americans, perhaps with the possible exception of the discounters.
In the meantime, as a consumer we know you are looking for the best price and we don't blame you for seeking the best value for your money. That's what we're all about - giving you the most for your money - a task that we do very well! Check out our prices. We don't claim to beat them all - We DO beat them all - guaranteed!  | |
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