|
FROM THE FIELD
September 2004
The New Maze in Equipment
Purchasing -- Part II
Yes,
well, Part II. For those of you who blew off last month’s
harangue here, a quick catch-up: It noted that two big factors
hitting right now will probably permanently alter how you
spec/purchase. Part I dealt with the zooming global demand for
materials pushing up prices for everything from rebar and cement
to stainless steel kitchen equipment. One way to beat this
long-term problem, we suggested, might be to consider less
costly materials and finishes in some applications. (Very often
customizing expenses would offset materials savings, but you
won’t know unless you start looking.)
The second
part of the new zig-zag in the purchasing maze originates closer
to home: The distribution model is bent, if not broken. It has
to change, and that means you too will need to change.
A solid move
to unbundle support services is afoot, which means you might
soon begin selecting and paying a la carte for the
equipment item itself, then separately for individual services
like staging, delivery, set-in-place and so on. That actually
represents a great opportunity for you to spend money only for
the services you need, and save it where you can. But it’ll
involve a couple extra steps in your decision making.
 |
|
|
Distribution is
bent, if not broken. You'll see new
approaches soon.
|
|
| |
|
The
unbundling’s coming because loads of dealers aren’t making
enough money to stay viable and reliable on the customary
package deals. In fact, Dr. Albert Bates of the Profit Planning
Group told the Foodservice Equipment Distributors Association in
March that his FEDA research showed “median profit is not just
at a low, but at a dangerous low.” He suggested many
businesses in equipment and supplies distribution literally
would be worth more if they liquidated.
How could
that be? The world’s changed. It used to be that one price
tag—tied to the equipment—was paying for everything from spec
assistance to delivery, demos and so on. Many dealers have even
been offering kitchen design services “free” if you bought the
equipment from the dealer.
But all
that’s in big flux now. Margins have dropped like deck ovens off
the back of a truck. Overcapacity is one culprit, inflaming
unprofitable competition at both factory and dealer levels. Add
in an increasingly sharp-penciled end-user market, with ever
bigger purchasing clout, and things get really dicey.
Alternate
forms of distribution, too, have carved up business that used to
sustain full-servicers. Much as big-box retailers and specialty
stores reshaped the department-store landscape, broadliners and
drop-shippers have snared their fair share of low-maintenance
volume, leaving the high-support categories to the full-service
dealers.
All of which
would be fine if the full services could be sustained on
the E&S pricing. But they can’t. Wal-Mart won’t spend an hour
sorting out your audio needs, and Circuit City doesn’t set up
your entertainment center for you. Full-service E&S dealers
can’t continue to perform services they’re not being paid for.
So prepare
for a little extra homework. You’ll know exactly what you’re
paying for, and you might be able to save a few bucks in the
process. You’ll just have to give it some extra thought.
Brian Ward
Chief Editor
|
