Looking at Jobber Relationship Problems Could Provide Answers
We receive many comments from tire dealers regarding their relationships with suppliers tire companies, wholesalers and parts jobbers alike. Recently, Gary Goms, owner of Midland Engine Electronics & Diagnostics in Buena Vista, Colo., and a contributing writer for our sister magazine, Counterman, discussed such relationship problems from the parts jobber perspective.
Although retail customers come and go in today’s automotive parts market, it’s virtually impossible for the jobber store to lose a dealer account to an aggressive competitor without suffering lasting damage to sales revenues.
When a jobber loses a dealer, the account is not easily replaced because jobbers depend on a very limited number of dealer accounts to keep their bills paid. Losing an account requires a painful self-examination of policies and procedures. Jobber self-righteousness must go out the window if the account relationship is to be renewed or replaced. After all, there’s no room for blind pride at the bottom line.
Losing a dealer account doesn’t come without warning. The most obvious red flag is when sales to a specific dealer suddenly begin falling off. Another occurs when the jobber becomes a second-call source for items needed to complete large jobs. Few dealers, for example, will buy a wheel cylinder without buying the brake shoes needed to go with it.
The most important red flag is the loss of a positive relationship between the jobber and the dealer. Good commercial relationships are vigorous and evolve into more of a personal vein. When daily business transactions lose their humor and their give-and-take, the commercial relationship usually begins to chill.
If the relationship goes from personal to "strictly business," the dealer is losing his enthusiasm, and this may be reflected in an attitude that says, "I’m ordering parts from you only because my new supplier doesn’t have them."
Price is often the first conflict to arise. In most cases, the phrase: "You’re just too high-priced," is a symptom of more serious issues. Few distribution systems suddenly increase their prices. Most struggle to be as competitive as possible. So, if a dealer opened an active account with a jobber five years before, it’s safe to say that if price wasn’t an issue then, it shouldn’t be now.
Of course, if a new discount retailer moved into the area, pricing might temporarily become an issue. But the fundamental reason a shop opens an account with its local jobber is to gain access to professional-grade repair parts and services normally provided to high-volume accounts. Most dealers understand that quality and service cost money, and to get that they’re willing to pay the higher price.
When price becomes an issue, it can be attributed to underlying reasons like declining revenues in the dealer’s shop caused by poor marketing or poor service, or the dealer’s shop may be experiencing a decline in the quality of customers coming through his door. In any case, it is likely he is experiencing profitability problems of his own and is expressing his frustrations by blaming the jobber’s pricing structure.
Although the price sensitivity issue isn’t easy for a jobber to resolve, it’s important for the jobber and his dealer to understand that the value of parts is best expressed in time, and not dollars. Wait times, warranty times, installation times and delivery times are vital components of the ultimate retail price.
Given an average shop rate of $60 per hour, an overnight order, for example, may tie up a service bay for up to eight working hours or $480 worth of time. A no-labor warranty may add $180 to the price of a $35 water pump. Fit and finish problems may add another half-hour or $30 to the installation time. Sending a technician to pick up a part costs $1 per minute in loss of productive time. Therefore, it’s more productive to stress that time, not dollars, is the true measure of value in any automotive replacement part.
It’s certainly not unheard of for a dealer to call separate jobbers for the same part and buy from the one who arrives first. In some cases, it’s easy to understand how a dealer can be frustrated with slow, unpredictable delivery service that he would be willing to commit such an act.
Delivery conflicts are the most frustrating for jobbers because delivery is one of the most expensive services a store has to offer. It’s also difficult to predict periods of peak demand or the urgency with which a part is needed. Both of these concerns can be put into perspective by training your counterperson to simply ask the dealer when they need the part.
Counterpersons should be aware, for example, that parts like belts, hoses, filters and batteries are usually on-demand sales. If it’s a customer-wait situation, the part must be delivered immediately because making the sale depends upon how fast the customer can be sent on his way. Based on the dealer’s expressed time requirement, other parts can be dropped off during a routine parts delivery.
Many of a dealer’s delivery conflicts can be resolved not by increasing the number of deliveries, but by prioritizing deliveries in a way that ensures that the dealers who are in the most need to get their parts first.
One perplexing conflict a jobber must address is the functionality of his inventory, because inventory is a local, not a national, issue. Clearly, a jobber isn’t going to sell nearly as many tire chains in Phoenix as he could in Denver.
Basically speaking, inventory coverage is determined by three factors. First, the part in question must exhibit a significant failure rate. Second, the local vehicle population using that part must be large enough to generate a sales history. Third, the jobber must have local shops that install these parts. Without these three factors, the parts simply won’t move off the jobber store shelf.
Consequently, when a conflict arises about not supporting a dealer with an adequate inventory, it’s important to understand that service means delivering the right part to the right place at the right time. To do this, the jobber should develop a "lost sales history" as well as a sales history to uncover any need for broader inventory. Neglecting lost sales can be a large contributing factor in losing a dealer account to another store.
If a dealer is buying a part, it has a sales history. If he’s not buying the part, it could be because it’s not on the jobber’s shelf in the first place. If inventory doesn’t match market requirements, you’ve giving your dealer a very good reason to buy from your competitor.
Issues like past-due accounts, excessive parts returns, unusually high warranty claims and unrealistic delivery demands are best addressed by writing policies that ward off potential conflicts in a proactive manner. If nothing else, policies are written statements that inform everyone what a store’s basic procedures are and how they will be applied to guarantee equal treatment to all commercial accounts.
Although it’s impossible to write a policy addressing all contingencies, any specific policy should cover most day-to-day transactions. Policies are most effective when assembled into a handbook, and they should also be audited periodically through input from jobber employees and even dealers.
Conflicts can arise when policy exceptions are made. For example, if a jobber performs a major inventory buy-back for one dealer and not the other, he can expect conflict. A manager simply can’t re-write a policy for a specific account. Following a well-developed policy is an important step toward resolving conflicts before they result in the loss of a valuable account.
There are many reasons why business relationships can sour, but most are controllable. By proactively assessing your ability to meet a commercial account’s expectations, you can eliminate opportunities for business-losing conflicts to arise.