You may remember last week I mentioned in this blog how a dealer I'd heard from had voiced concerns regarding disintermediation. After my trip to an online dictionary, I understood this to be the concept of manufacturers cutting out the middleman (or dealer) and selling their goods directly to the consumer.

Apparently it's a trend which has been increasingly seen on the high street during the time of Covid and the dealer I heard from had concerns that the practice was making its way into our sector too.

So I put a call out to see what thoughts our readers had on the subject. We had a couple of interesting thoughts posted below the line on the blog, one of which described the actions of some manufacturers as a "creeping threat".

I subsequently heard from a dealer who didn't want to post publicly, or to have their name revealed, who explained in detail to me just why they believe that disintermediation has become what they termed as a "real problem" of late.

Whilst not naming names to me, they spoke of two manufacturers who they felt in particular believed it was acceptable to undercut dealers with deals that they couldn't afford to offer. Clearly the dealer I spoke to was not happy about the situation to say the least.

They gave me several examples of where they felt these manufacturers were effectively cutting the dealer out of the process. They spoke about a grass trimmer for example, that they said was so cheap that they can (and do) sell it at full RRP, rather than giving a discount. They would make £40+ profit selling it for that - but when the manufacturer sold that machine, they gave away over £50 worth of freebies that the dealer might have sold for extra profit and they received just "a measly £13 commission". 

Another example they gave was related to robot mowers. They spoke of a manufacturer who was offering customers a cashback if the mower was bought directly from them - yet the dealer could not give that same cashback. The cashback was so large, they said, that it gave them a moral dilemma. Do they keep quiet and sell the stock they have bought from the manufacturer or do they do the customer a favour and tell them if they order direct they could save up to £350? 

A final example they cited was from earlier in the year where they said they honoured the promotional pricing on certain machines and the manufacturer then undercut them online by offering lower prices than their own promotion.

And it wasn't just on whole goods sales where they felt disintermediation was happening - they believed after-sales were also being taken away. Some manufacturers, they said, are taking the easy pickings such as mower blades, nylon cord etc. "These things are our bread and butter," they told me.

"I don’t think some manufacturers realise that dealers need the profit on new machinery sales to support their businesses," the dealer said. "We are desperate to recruit good staff but the remuneration we can afford to pay is low. What we pay some of our technicians with years’ of experience is little more than a teenager could get stacking shelves in a supermarket. That’s wrong. But, our service prices are held low because of the value of the products we are working on. The value of those products is in turn held low by the few dealers who insist on giving product away online."

They continued, "Whilst we don’t necessarily match online prices there is only so much more we can get from a customer and our margins are being eroded. If we now have manufacturers jumping into the mix with cheap prices, freebies and other deals we can’t match and they are 'selling it in a box', it does not bode well for the future."

The dealer I heard from said that if manufacturers must sell online, they would like more to adopt what they described as "the Mountfield model", where the dealer receives the same margin as if they’d sold the product.

"We don’t - and never have - expected something for nothing," they said, "but if manufacturers want us to be here to service and support their product they need to make sure that the financial viability stacks up."

Strong, impassioned words. And ones which perhaps many reading this today can relate to?

Please feel free to leave any thoughts below.