Shopping for the Lowest Price...the pitfalls

[drcollie]

On my motorcycle ride north to the Flight 93 Memorial this past Monday, I went through four states and several small towns. Imagine my surprise when I came across an old competitor in one of these towns, and saw their sad, broken-down building. I actually had to stop my bike and take a photo - this dealer was a thorn in my side (and others) for years, and I lost many sales to them on pricing that I could not price match to. Their business model was not to interact with customers and advise them - advise them on furniture - it was to let other dealers do the work in their showrooms and then go rock bottom on prices and steal that customer. And in this particular brand they were the lowest in the country on price, by far. Consumers flocked to them, because who doesn't like saving money? I always try to be aggressive on price, but these guys were ridiculous and their margins unsustainable. It was just a matter of time until they crashed, and when they crashed - they did it hugely.

They had two major problems.

One, they were not the least bit interested in responding to customer concerns on any issues. They would not return customer phone calls or handle any warranty work. So, the consumers who purchased from them would eventually call the factory with their complaint, one they as the dealer were supposed to handle. Nothing irritates a manufacturer more than a dealer who won't take care of their customer's complaints and issues.

Two, they made so little money on each sale, their business was unhealthy and they ran out of money to live on. They were so intent on stealing every other dealer's sales that they lost sight of their own profitability and misjudged their percentages.

So what happened? They were taking payments for customer order and not placing the orders, then lying to their customers who called to inquire why their furniture had not yet delivered and blaming the delays on the manufacturer. They were simply keeping the money for their own personal expenses and had no intention of putting the orders in. And they didn't do this to just a few people, they did it to hundreds over a 6 to 9 month period. These angry customers eventually called the manufacturer and were told that this store never had placed their order. As a result, they had their dealership pulled for all the premium product lines they were selling. The Customer Service people at the manufacturer said it was terrible to hear how many people were swindled by them and there was nothing they could do other than make sure they could not sell the brands again.

So here's my point. I know a lot of people enjoy the hunt for the lowest price, its a shopping 'game' and if you spend enough time on the internet and calling around, you will eventually find that lowest price dealer. But, the question you have to ask yourself is "Who am I dealing with?" Are they reputable? What is their reputation? Are they likely to take my money and run? Many do. A great deal is not so great if you never get your order and fail to get your deposit back.

Running a retail operation is nothing more than percentages and volume. You have to have a certain percentage mark-up and do "X" number of units to stay in business. If either falls too low, your business cannot survive and will collapse. And that's when people start getting crooked. These guys had sold too low - their GPM (Gross Profit Margins) were inadequate. After doing this for 30 years, I know what margins have to be in order to have a healthy business and support my own family as well. Go below those margins and I endanger my business and livelihood. That's why I am hesitant to match prices on items - I'm already as low as I can go using my mathematics. Occasionally I will if need be to save a sale, but not if the price match is ridiculous. Few stores have the reputation that mine does with both consumers and suppliers, and I am proud of that as it took 30 years to earn it. I am also one of the very few dealers that takes only a 20 % deposit. I do that for two reasons, one is to have you lay out as little cash as possible on an order and the other reason is I am not 'upside-down' when it comes time to pay the supplier once the goods are shipped. I am a very conservative businessman.

A warning to those of you that like to shop to the last dollar. If the price seems too good to be true it probably is. Do your homework before sending in money, and make sure your dealer is solvent and has a good track record. Otherwise, when the music stops you could be left standing with no chair to sit on.

Oh, and that store is still in business, though they look like they are barely hanging on and with lines no other dealers want. So their still out there, waiting on their next consumer shopping for the rock bottom price to they can victimize them as well.