It's Not Just Business; It's Personal

By Tim Nissen

"It's Not Personal; It's Just Business." With those words, a distributor pulled our second best selling stove line for the past four years and effectively concluded an eleven year relationship. We had won sales awards all four years from the manufacturer, but the primary reasons given were declining purchases this past season, and the fact that the distributor intended to market fireplaces directly to builders in this market, competing with us and other dealers. A spa store had been recruited to sell this particular line of stoves. We explored legal options, of which there are several, but decided that this marriage was over, and we were better off pursuing positive options.

Last week we got a form letter from another major supplier threatening to "compete against you in your market," if we were to sell competing lines of cast iron stoves. "We will not sit idly by while our sales are impacted." As it happens, we no longer show either of these lines, for sound business reasons, we believe. However it is worth noting that this same manufacturer has recently chosen to market their new gas products through a separate distribution channel to HVAC contractors, who compete against me as a specialty hearth products retailer. The manufacturer claims that positive incremental sales are involved in their strategy. I can't help but think that positive incremental sales might be earned via a dealer commitment to diverse enamel cast iron products. I can't help but think that committments cut both ways.

We also sell a major gas fireplace line to builders and for the past three years have achieved a higher than 50% market share with this company's products, in a fairly competitive market. Our unit sales with this line have increased over 70% in two years. Last month this manufacturer set up a large regional distributor with the same line, stating that they wished to "clean up distribution." So, we have gone from two to three distributors in an already competitive market. We fail to see how this move cleans up distribution in this market, and we wonder about the heavy investment we have made to establish this brand as the market leader. Again, committment cuts both ways, and we are wondering about the balance is this relationship.

Anyway, this has been an interesting spring in the Salem, Oregon market, and I am sure that it's been interesting in your market too. These events have pointed up some important points about business and personal relationships. I have done a lot of thinking about these events and offer the following thoughts in the hope that Hearth Products Industry members will find them provocative, even if you don't agree with them.

First, I strongly disagree with the business vs. personal split. It implies that it's o.k. to treat your business relationships differently and worse than you treat your personal relationships, that it's o.k. to screw your customer, but not your friend, that it's o.k. to tie up a line to keep a competitor from having it, but not o.k. to steal from a neighbor. In my opinion, personal relationships are at the core of successful business relationships. My customers are people, and we deal with them personally, in a businesslike way. We intend to communicate clearly and honestly, to be fair and flexible, and to be mindful of the personal business relationship. As a customer, I expect to be treated in the same way.

Secondly, if there is any alternative at all, why would a dealer do business with a supplier who competes against them? The installing distributor aiming for the builder customer can't expect to sell to dealers who seek that same builder,s business as well. The "whole-tailer," who sources product direct from the manufacturer and expects to re-sell to dealers who are competing for the same customer are kidding themselves. No dealer is going to be loyal to a supplier who is also a competitor, especially one that has a pricing advantage.

In addition, a product that once was sold exclusively through specialty stores and is now available via competing HVAC dealers is of lessor interest to that dealer. For example, Makita drills were once a specialty store item, now they're everywhere, including Costco and Sam's, and the specialty tool store is featuring other drills. I can't blame them a bit. As the market for gas products expands, manufacturers are seeking new channels of distribution via HVAC dealers and retailing gas utilities. They are, of course, free to do so, but shouldn't expect specialty store customer loyalty in return.

My conclusions about this interesting season?

First, there are manufacturers and distributors who support the specialty hearth products retailer exclusively. If you are a specialty retailer and you have a product line where you have a reasonable territory that you can service, the full attention and support of your supplier, this line, or those lines, deserve your highest priority. These lines deserve your full commitment in terms of display & merchandising, advertising & promotion, sales & service. Vote your pocket book.

Second, effective, profitable business relationships are personal. They involve clear and honest communication, balance in short and long term thinking, and trust. The smaller the business, the more personal it gets, and the hearth products industry is made up primarily of small businesses. So don't tell me it's just business.

Afterword (April 9, 1996)

Distribution patterns in the hearth products business have continued to evolve. In our market we have seen consistent gains on the part of heating contractors, mass merchants, installing distributors, the gas utility and retailing chimney sweeps. Most of the growth and the new action has been in gas. However, few products lend themselves to specialty retailing the way hearth products do, and we have more than held our own. While we havn,t grown much these past two years, our profitability has improved, primarily because we insist on a certain gross profit, which we earn by doing a better job at every step than our competitors, especially with excellent installation and repair service.

It,s interesting to note that the distributor I wrote about and their new retail outlet (the spa store) both failed and effectively went out of business. The manufacturer of the line in question, Quadrafire, remains committed to the specialty retailer, but is now selling direct. Losing the line turned out well for us, as we added two new lines that we have done well with. I feel bad for the people involved, but we all live with the consequences of our decisions, business or personal, good decision or bad.

Vermont Castings has continued strong development of their new distribution channels. Wonderfire is aggressively sold by a variety of utilities and heating contractors and installing distributors. In most cases, there is no difference between the Vermont Castings brand and the Wonderfire brand. New products like the bar-b-que, cast iron furniture, gas logs, and new fireplaces are being introduced and marketed through both channels of distribution simultaneously. Sometimes both the Wonderfire and the VC reps are calling on the same account! When I asked some questions about pricing and who my competition was likely to be, I was told, "We are trying to grow our business and can't be hampered by those dealers who aren't attempting to grow.

We continue to sell Vermont Castings, and our numbers are up with the line. It is no longer the franchise line that it once was and we believe that we spend a lot of time selling Vermont Castings/Wonderfire product for dealers who make up for a lack of knowledge, showroom, personnel, promotion, installation and other service with cheap prices. The Wonderfire dealer is often a parasite feeding off of the efforts that others have made over the years to establish the name and reputation of Vermont Castings. We,ll continue with VC as long as it makes good business sense for us.

Heat N Glo has also continued to work multiple channels of distribution. In our market there are three distributors and they will aggressively sell to anyone short of direct to the retail consumer. We have seen more and more competition from other retailers, heating contractors, the local gas utility and others, all basically selling the same product. It is a very strong line of products, and we have a tremendous investment over the years in making it successful in this market. As long as Heat N Glo continues to be the market leader in high efficiency gas fireplaces, and as long as we can compete, we,ll stick with our program. Our attitude toward Heat N Glo is the same as their attitude toward us. We are going to do what's right for our customers and our business. If Heat N Glo helps give us the marketing mix to compete profitably, on we go. If we can,t, then we'll need to either change or go out of business.

To conclue, I,d have to say that more and more, it is just business, and I feel compelled to do what's right for my customers, my employees and my business. While personal relationships with our customers, suppliers and employees are critically important, performance counts for even more, and we believe that we can perform best with our strongest emphasis on products where we are fully supported by the manufacturer.

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