Interesting Phone Call Inquiry on Pricing

I had a phone call inquiry on pricing on some Hancock and Moore from a customer in New York on a couple of pieces. I gave her the prices and she paused and said "I can get a better price from "X" store in North Carolina, will you match or beat their price?, they are lower than yours."

My reply to her was "Why would you want to buy from that dealer? They went massively bankrupt a few years ago and left both suppliers and retail customers holding the bag, many people lost their deposits and never got their furniture. Suppliers did not get paid into the millions of dollars from their multi-state chain. You order through them and your order - and your money - could be at risk. Same owners, same name - now they are operating out of some shell of a building."

She responded "I like to get the lowest price - I'm sure they would be OK now, don't you think?"

I said "If they sell too low they can't stay in business, and those prices are too low to be sustainable for the long term. It's like a Ponzi Scheme - it works for a while but at the end, someone is left holding the bag. You don't want to be that person."

Yep, I'm SURE they changed their ethics and learned their lesson from the prior bankruptcy <sarcasm>

Know whom you are buying from. Do your due diligence. A deal is not a deal if you never get your order and cannot recover your deposit money. Be smart about it.

Even if you thought you would get your order, why would you support an unethical business like that? I guess morality is worth saving a few bucks.

There are quite a few people that will shop for the last dollar on an item, it becomes part of the conquest of the sale. I see it happen every day. There is always a dealer out there that will sell an item for the lowest price in the country - but the funny thing is that dealer never lasts, they go under. And a lot of people say "Well, I don't care if he goes bankrupt as long as I get my furniture." O.K., I get that - but what if you don't get your furniture? Don't think your credit card is ironclad protection, because its not. So many dealers go out of business and have for the last two decades and the way most of them go under is like this:

* They have a basic misunderstanding of what it takes to run a business. They don't understand margins well enough, their payroll and tax burdens, plus they carry too much debt they have to service. All these are fixed costs that come every month, whether they have sales or not. To these dealers they think cash flow will take care of obligations, but the reality is their margins are not sustainable because they are undercutting the businesses that DO understand what it takes to run a business. When sales fall off for a couple of months due to a small recession, worries in the stock market or housing markets declining - they struggle to make payroll and do their debt service.

* What happens next is they use customer deposits (typically 50% at time of order) to pay their debts. That is money that is not "earned" because they have not delivered the product, and of that 50% they collect, only about 20 % is profit, so they are 30% in the hole when they spend the customer deposits against their bills. The supplier ships the product, and now that dealer owes 80% of the price to the consumer back to the supplier for the goods but he doesn't have it, so the bills become late. Instead of paying in his net 30 terms, he delays the bills out to 90 days. Then they pay the oldest ones from the new customer deposits coming in - and they make sure they get the sale to any phone customer by saying "We will beat the lowest price". Customer believes it and orders, giving them the 50% deposit. Perhaps they have shaved another 5% off their prices - or even 10% - at this point they don't care, they just just needing cash flow of any kind.

* Now their bills go to 120 days out and suppliers say "We will not ship to you - you are on a credit hold pending payment of your past bills" By this time they are hundreds of thousands of dollars behind to their suppliers, yet they keep taking - and sending in orders from new customers still giving them their deposits enticed by the "best price in the country". They struggle to pay the oldest invoices first, hoping to get release of the credit hold on product. The banks will no longer loan to them. When customers call to see where their order is they are given the run-around and place the blame on the supplier "There's a delay in your order". Yes there is! The supplier won't build any more customer orders for your store until you pay your bills! They are not being criminally fraudulent, either. Why? Because they are sending in the orders - its the supplier refusing to build them until their account is paid up.

* Eventually they know they are doomed. The money is gone, the orders won't ship from the suppliers and yes they keep taking money for new orders from customer deposits to pay their own home mortgage and a few employees. The collapse comes and they turn off the phones and lock the doors. Now its bankruptcy time, Chapter 7 (liquidation), not Chapter 11. What assets are left to sell? Virtually nothing.... Suppliers know they won't get paid. Customers fight to get their deposits back but there is no money in the bank for Visa/MC/Am EX/Discover to draw a charge back from. Frequently the remaining employees don't even know they are out of a job until they come to work in the morning and find the doors locked. Everyone stands in line to get their money, it may be pennies on the dollar at best, if anything.

The store in question in this example went under like that - it was a big chain operation that had big, beautiful stores in North Carolina and Florida, and now its back a few years later with the sons running it under the same name from a pre-fab building in the middle of a cow pasture. Technically it's a new business, so the suppliers have them opened up again, but its the same business model "We have the Best Prices on Everything we sell" Do you want to buy from them? Maybe you do, maybe you don't. The thing is, you can't call the supplier and ask about the dealer's financial health - the supplier will not disclose that to you, the retail consumer. To me as a consumer, they would be kryptonite, but I know the backstory on them.

The Keeping Room has been around since 1979. We are not the biggest store, but I have zero debt load. We are a cash business and own the building and all the inventory, there is no bank loan. I only take a 20% deposit - not 50% as other stores do. I like that because it means when the furniture ships and YOU pay your balance, I always have enough to cover the bill to the supplier. I have never once gone beyond my net 30 days to my suppliers. As Jack Glasheen (now retired) the founder of Hancock and Moore once said "Duane, you can get any dealership you want because every one in the industry knows you pay your bills on time and properly represent the brands you carry." I won't lie or mislead a customer to get sale. Never. You may not like what I tell you sometimes but you will always get the truth (cause of order delays, etc), because integrity is more important than money.

If you require the cheapest price and the cheapest shipping - you will eventually find it. It's out there. You pays your money, you takes your choice, but now you know what happens to these dealers that operate like that. How many are still around a decade later if you need them for service or advice? None of them. Not a one - they're all gone.

You get what you pay for-- most of the time. I buy most of my furniture from a local store that has been in business since 1939. They have H & M, Bradington Young and other higher end manufacturers. Are they the cheapest around? No But they take care of their customers going the extra mile. They don't want anyone to have a piece of furniture they don't like.