Service Dealer held another call with a panel of dealers this week, representing businesses around the country, to catch up on what issues are affecting readers at the moment.
We thank everyone who gave their valuable time to take part once again. As ever sessions like this are invaluable to us as a trade journal to gain a snapshot of what life is like at the coal-face of the industry at the moment.
Price rises on back orders
Obviously there's a lot going on right now - both specifically in regards to our sector and in wider society which impacts on what dealers do, or will be doing, over the coming months. However there was one particular issue that cropped up when we spoke on Wednesday, which struck me as significant and may well be something that dealers across the UK have experienced in their businesses.
To summarise, there was concern voiced by various dealers regarding price rises they had seen from manufacturers - specifically on machines that they had on back order.
We had dealers describe to us scenarios where they have a customer who has bought a machine from them - a machine that then faces a delay on delivery. During the course of that delay what has been happening in some cases, is that certain manufacturers have imposed price increases on the machine on order.
This means that the dealer then has to either take the hit to their margin by absorbing that price rise or must try to pass on that increase in cost to the customer - which as you might imagine, is an awkward conversation!
This is clearly a far from ideal situation and one which had concerned several specialists who we spoke to this week.
I must stress, this wasn't a practice that had been seen from all suppliers. There were however, a couple of manufacturers whose names cropped up more than once. These being Stiga and Ariens.
I reached out to both of these companies following our call, to see if they had any comment on the situation.
Stiga response
Gary Whitney, md of Stiga UK told me there were a couple of factors at play here from his company's point of view. Essentially he explained these are the mammoth increases in shipping costs that all companies will be experiencing - plus an invoicing mistake they have pinpointed.
Gary told me, "Every container that we have bought over from China since November in order to supply our dealers – we have been taking a bath on that shipping cost. We’ve been wearing that cost. However it gets to the point where we have to share this burden.
"Until now we have been bringing over those containers at considerable cost to ourselves but giving our dealers the opportunity to sell the machinery and make money – that was the choice that we had made since November.
"However, it’s now got to the point where we need dealers to make a contribution. Not a contribution that takes out all of their margin – but a contribution that takes out a manageable proportion of their margin, if they choose not to pass this cost on."
Gary said that to help mitigate any loss of margin Stiga have removed all discount pricing from machines displayed on their website - a pricing structure that he said dealers tend to follow. "By doing this, it will allow them to sell our stock that they have in their stores, that they haven’t sold yet, for a higher price and greater margin."
However alongside these shipping cost increases, Gary said Stiga had also discovered a mistake where some of their dealers had received invoices where the price of the product listed, wasn’t the price at which they had ordered the product.
"We discovered a mistake," Gary explained. "When the freight surcharge was added to orders placed before the 1st of May, the process also updated the product price to that date. This meant that that a new higher price was invoiced along with the surcharge.
"We are currently unpicking this mistake that we apologise for. We were addressing this issue on a case by case basis, as each individual dealer identified it to us, but we are now getting in front of it for all affected dealers." Gary says any dealers concerned by this are invited to contact him directly.
He went on to explain this freight surcharge will unfortunately be part of their business until freight normalises - which presumably will be common across any manufacturer who has to import anything?
Ariens response
Ariens meanwhile also cited shipping costs as well as increased prices for raw materials.
Darren Spencer, Vice President AriensCo EMEAA told me, “AriensCo is committed to designing and manufacturing products specifically for the U.K. market. During the first six months of 2021, manufacturers in the U.K. (and globally), experienced unprecedented increases in cost. Commodities, such as steel and rubber, rose in price by over 70%, whilst the cost of inbound sea-freight multiplied by a factor of six. Furthermore, delivery from suppliers is taking around four times longer than we would normally expect - compounding the issues and increasing manufacturing costs further."
Darren asserted that AriensCo have taken what he described as "all possible steps to mitigate the impact that these higher costs could have on dealers and to reduce the disruption in supply to the dealer network."
He continued, "These actions included long-term commodity agreements, higher volume bulk purchasing (to lower freight cost), increased inventory holding of materials and air freighting components from around the world. Since the first lockdown, AriensCo has continued production uninterrupted - absorbing all the additional costs incurred in manufacturing. However, with this exceptional situation, AriensCo (along with most other manufacturers) was forced to increase prices midseason. This unique set of circumstances meant that all production, from the date of the price rise, was required to absorb some of this cost increase.
"This is an unprecedented but necessary action from AriensCo. However, in doing so, we have been able to secure continued supply for our customers.”
It'll be interesting to hear what you, our dealer readers think about this situation. Please let us know in the comments below if you've experienced these increased prices between securing a sale and taking delivery of the machine. We'd like to hear your thoughts.
Mid-season price changes disruption
Another point related to this change in prices from manufacturers raised by dealers this week, is the huge task they are facing in their businesses, changing their whole system to reflect the new prices. This, we were told, is a long-winded, labour-intensive task, when the price changes are not uniform across the board.
We heard that if a specific brand had put their prices up universally by 3% for argument's sake, that wouldn't be so hard to deal with - that would be a straightforward job to make the alterations. However, it's when everything has different changes, both up and down, that it becomes a painful task. Huge spreadsheets, websites, point of sale material, it all takes a huge amount of time to manually adjust - which mid-season when dealerships are incredibly busy, isn't the best.
Apparently due to the nature of these price alterations which need to be made, the specialist dealership software systems that dealers use, are not of much help in making the job any easier or quicker either.
Dealers felt there must have been a better way to have brought these price increases in. The manual inputting of a huge amount of data is not what they want to be tying themselves up with right now.
There is of course an acceptance that price changes will be necessary this year - but imposing them mid-season? Dealers we spoke to felt this wasn't the most helpful way forward right now.
Communications from manufacturers
Another aspect of dealers' relationship with manufacturers that came in for some criticism on our call was the current state of communications received from suppliers.
Again, essentially tied into the delays on product and part deliveries, we heard a dissatisfaction specifically related to being kept up to speed on due dates for arrivals. Dealers are caught in a difficult position, being in the middle between customers desperate for answers and manufacturers who are not forthcoming with the latest news on deliveries.
It was said that sometimes manufacturers will claim that they do publish the relevant facts, but it's buried away somewhere, requiring the dealers to go searching for it - again taking up valuable time. We heard that dealers would appreciate being told the information clearly up-front, with regular updates.
If a dealer can be on top of the latest dates, they can preempt enquiries and hopefully avoid dealing with irate customers is the theory.
We've been talking about need for clarity between suppliers and dealers throughout this pandemic on our calls. We hear that some are across this well, really getting their messaging to dealers right. Others it has to be said, sound like they need to up their game.
Manufacturers need to be aware of these frustrations because dealers can of course choose to drop suppliers just as easily as the other way round.
