WHY IS PROFIT A DIRTY WORD?
Dealers need to 'putt for dough'
WHY has profit become a dirty word all of a sudden? The UK’s economic prospects are improving, jobs are being created - but still the ‘cost of living’ debate roars on with the underlying charge that the private sector is profiteering - or even daring to make a profit in the first place!
As any business knows, profit is the engine-room of the business. It fuels improvement, it fuels investment, it fuels training, it fuels job creation and it underpins the infra-structure of a successful business.
Making a profit is Rule A, right through to Rule Z.
The issue of retained profit was raised by Henton & Chattell’s md Peter Chaloner at his recent company dealer days “The business partnership between many lawnmower producers and their independent dealer network is fractured,” he said. “Low-priced products are increasingly channelled through the web and online, which has virtually driven out profitability for many dealers of major lawnmower brands”.
He added, “The current free-for-all on the internet and websites continues to significantly damage dealer profitability and confuse customers.”
Of course, he is right, but profit given away to attract customers has long been a hairy topic for dealers and manufacturers.
Delving back into my long-distant memory of selling Ford Tractors (yeah, I know, a subscription to Vintage Tractor this Christmas would be appreciated!), the sages at Basildon Towers spent their time convincing dealers that ‘giving away all your discount was good for business’.
Their rationale was that increasing ‘the park’ of their brand in your area would generate profitable parts and service business.
Maybe that philosophy still pervades in the ag market, but then there was no internet, the machines require less servicing today, and Peter Chaloner was refering to consumer durables - often a ‘distress’ purchase for many.
Why? I wonder. When I want to buy a new camera can I find ‘no ‘happorth of difference’ between one model and another in price when I scan the photographic magazines or websites? Whatever is happening, the photographic market appears to be stabilised.
Some suppliers are trying their damnest to bring transparent profitablity to the market. A ‘shout-out’ here to GGP who have gone a long way to promoting attractive price points online, which can still result in acceptable margins for dealers. Transparency IS the key.
Maybe giving away discount is the line of least defence, maybe it’s lack of understanding, maybe it’s a desire to win business at any cost.
Either way, I keep coming back to the old golfing adage in the pro game, “Drive for show, putt for dough”.
For dealers, the ‘driving’ is the showroom, the advertising, the back -up service - the ‘putting for dough’, the 'closing the sale' is what really counts!
Chris Biddle
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