View From The Supply House
In addition to my duties with this magazine, I wear a second hat as editor of Supply House Times, the leading publication for PHC distributors. Here are some of the common complaints I hear from contractors about dealing with our industry’s distributors, and how it looks from the supply house point of view.
A gross exaggeration. Most PHC supply houses are able to fill most orders most of the time, but there’s no question stock-outs are more common than they used to be. It’s simply because there’s so much more product out there nowadays.
Distributors categorize their inventory as A, B, C and D items, based on sales frequency. They try never to run out of A and B, but they’d go broke loading up on Cs and Ds that grow cobwebs on warehouse shelves. For C and D, distributors tend to draw from a central distribution facility, or they purchase it from a so-called master distributor that specializes in supplying small orders of oddball items to distributors across the country. Typically it takes a day or two to obtain the product from these sources.
That’s OK for most construction or remodeling jobs, but it doesn’t satisfy the repair plumber who needs a part right away. So he buys it elsewhere, which further reduces the wholesaler’s incentive to invest in that product, and the vicious cycle goes round and round.
Occasionally true, and while it leaves you scratching your head, it drives the wholesalers bonkers! The big boxes are masters of loss-leader merchandising, whereby they will take a few common plumbing products and pitch them for sale at little or no profit margin. They do that to draw the public into the store, and then count on selling people more merchandise at heftier markups.
Over the years I’ve reported on a few so-called market basket studies comparing the prices on an assortment of merchandise carried both by a big box and a supply house. Supply house prices always turn out to be significantly cheaper across the board, although one or two items might be priced lower at the big box.
This happens, though it’s the exception rather than the rule. Keep in mind that it’s in a wholesaler’s interest to keep prices up as much as possible, and the best ones have the sales and marketing savvy to do so. Because it takes more time and effort to sell to the public than to trade customers who know the products and how they work, nontrade profit margins need to be higher as well.
Nonetheless, in order to land a sale many wholesalers will capitulate to lower prices. Not only does this hurt the trade, it usually turns out to be a losing proposition for the wholesaler as well.
In days of old, contractors used to complain about wholesalers selling to the public at any price. Nowadays it’s largely seen as a waste of breath. Many markets still have one or two supply houses that sell solely to the trade. If contractors would funnel all their business to those suppliers, they would grow to be the market leaders and other wholesalers would feel compelled to follow suit. Instead, the trade-sales-only supply houses tend to be small niche operations. This vindicates distributors who solicit a wide range of customers.
Another exaggeration, but with a kernel of truth. Many wholesalers will admit in private that their people aren’t as skilled as they’d like them to be. They, no less than contractors, have trouble attracting and retaining good people.
Most of these complaints center on lack of product knowledge. Unfortunately, there are no crash courses available to teach newcomers the vast array of product knowledge needed in the supply business. As old pros retire from working the counters and sales desks, younger replacements don’t have decades of experience to draw from. Some of them may be management trainees put in the position for just a few months of on-the-job training before moving on to some other operational job.
These squabbles aside, plumbing and mechanical contractors remain the bread-and-butter customers of a vast majority of our industry’s distributors. Your relationship has grown more complex, but you share with them a vested interest in seeing one another thrive.