“The new dealer goes through an initial excitement of how easy the product sells due to its reputation,” Longnecker says. “This same dealer is also quick to discount, either because of the large stocking investment of a new product line or as an attempt to buy customers from a dealership they most likely competed against prior to this addition. In either case the new dealer is primed for overstocking, which breeds discounts.” Longnecker adds that new dealers who are prone to discounting have strained his dealership’s margins more than any recession has.
Some dealers would like to see a change in the way manufacturer and/or distributor sales reps are compensated. Most compensation plans encourage sales reps to sell as much as they can and/or set up as many dealers as they can. Conversely, incentives that tie rep compensation to dealer sell-through can help strengthen the dealer/supplier partnership—forcing both parties to work together to ensure the success of a given brand in a given market area.
That can be a scary proposition for some suppliers, though. There are far fewer dealers than their used to be, and the big ones keep getting bigger—making it harder for the smaller ones to compete. Growing market share is unfortunately not just a matter of being loyal to a dealer network. It’s a matter of assembling the right dealer network where loyalty is reciprocal.
“It’s too easy to point the finger at someone else,” Pesson says. “Dealers need to understand that doing business is not always easy. That said, one thing we can blame suppliers for is how easy they’ve made it to take on a new product line. In many instances they’ve lowered the dollar amount to become a dealer, they’ve added more co-op dollars for new dealers, they give new dealers ‘best bracket’ pricing and rebate checks at the end of the year, and the list goes on. The end result is dealers selling too many lines, causing the problem we have today.”
“The main thing our OPE Industry Relations Task Force is looking to do is build good communication and relationships between dealers and manufacturers,” NAEDA’s Kindinger says. “Then we can have open, frank discussions based on trust.”