Global Fastener News

1994 FIN  Letter of Frustration: Distributors vs. Home Centers

December 14, 1994 FIN – Much of the talk at the STAFDA convention in Las Vegas centered on distributors vs. home centers. Association president Rob Culgin read a letter from a distributor member expressing the “frustration, anger, and sense of betrayal many members feel today”:

“As a second generation, small distributorship whose family over the past 30 years, has had to conform to endless mandates by manufacturers, from whom we wished to obtain coveted distributor status, and who is now in channel conflict with these very manufacturers, I am primed, ready and able to call it like it is.
Let’s detail the real deal these ‘big box’ retailers receive. Let’s talk about tax-abatements; let’s talk about investment banking scams; let’s expose the real pay scales they employ; and let’s expose the buy-backing, shelf-dusting, ridiculous payment terms, advertising allowances, first order free, nit-picking, free freight, defective merchandise allowances, butt-kissing, job destroying, pay reducing, rep-agency eliminating, distributor smashing, selection limiting, self- gratifying deals that they really command from manufacturers. It breaks my heart to see how they, the public-funded, minimum-wage big boxes, have used deceptive pricing to hype their way into a position of greatness, leaving all of us old line suppliers and family-owned businesses looking like fools.”

Culgin ended the quote with his own question: “Did he forget anything?”   ©1994/2015 Fastener Industry News.

December 14, 1994 FIN – There are solutions to any problem between manufacturers and distributors, despite relationships which have never been as troubled, the outgoing president of the Specialty Tools & Fasteners Distributors Association told more than 4,000 members meeting in Las Vegas November 30.
Rob Culgin of Pro Tool & Supply in Waltham, Massachusetts, acknowledged that “there has never been a time when distributor/manufacturer relationships have been so contentious.”
“It is no coincidence that Arthur Anderson (the international accounting firm) lists this problem as the #1 new reality in their ‘Forces of Change 2000’ study,” Culgin said at STAFDA’s 18th annual convention.
There is good reason to work together, Culgin said. “Skeptics point to integrated distribution consortiums, buying groups, etc.,”he noted. “But family-owned businesses account for 90% of all U.S. businesses and independent distribution remains a huge economic force.”
Culgin referred to a 1993 STAFDA survey of associate members which showed only half do business with the home centers. Of those who do, just 7% say more than 50% of their volume is done with them.
“So once you get past the high profile lines, like power tools, there are plenty of vendors to choose from, among our 875 associate members, who either don’t sell or don’t do a lot of business with home centers.”
Culgin warned manufacturers doing business with the national chains that “STAFDA distributors expect to be, and deserve to be, given equal treatment.”
“Don’t be so blinded by volume that you forget who helped establish your brand in the marketplace, who you expect to stock your ‘dogs’ as well as your fast sellers, who you count on to take new products to the job site, and who you expect to service the product after it’s sold.”
Noting that portable electric tools were 16% of STAFDA members’ sales a few years ago and only 10% now, Culgin said manufacturers will pay a price for selling through home centers which lower the margins.
“That is not a threat, it’s simple economics,” Culgin said.
“It is impossible for a STAFDA distributor to develop a partner relationship with any manufacturer who doesn’t treat us as equals to home centers. When you look at it from a function standpoint, we are entitled to your best deal.”

Distributors’ Duties: Pay Quicky
Culgin called on distributors to pay manufacturers promptly: “It’s not fair to our manufacturer partner to use him as a bank. We can’t link our receivables problem with the obligation we have to pay our bills in a timely manner.”
Manufacturers could help distributors, “and themselves, if we had some reasonably standard industry terms so that we could pay all invoices on the 10th and 25th, for instance,” Culgin said.
A STAFDA survey revealed 27 different sets of terms, he noted.
“You can see how that complicated life for our payables people,” Culgin said.
Culgin called for fast-pay discounts to reward the good paying customer.

Role of the Manufacturers Rep
Sales training is a duty of direct factory people and independent reps, Culgin said.
Distributors “aren’t expecting to have their hand held,” Culgin said. “But we do need someone who can train our people, make the trouble-shooting call with us on the job site, and keep us informed of changes.”
Culgin also suggested:
• Co-op advertising funds should be available for non-traditional uses such as demo merchandise.
“I’m not suggesting manufacturers increase their co-op budget, just allow flexibility,” which reps can monitor.
• Distributor advisory councils can strengthen partnerships. Culgin recommended meetings have advance agendas, encourage distributors to speak, include manufacturer’s top management and be at the headquarters so engineering, credit and customer service staff can participate.
• Customers have changed, Culgin observed. “Whether on the job site or with industrial customers, today’s buyer is really sharp. He is price-driven, well-educated, surrounded by technology and dedicated to lowering his company’s cost of doing business. He’s been to all the seminars on how to hammer down suppliers for the best price. Often he has a very good idea of our cost. If he’s interested in value-added services, he doesn’t expect to pay for them. And form him to take the next step up the corporate ladder, he has to show his boss how much he’s saving the company.”
• “Only through open communication, even on sensitive issues, can a quality partnering arrangement be developed that answers the question for both parties, ‘What’s in it for me?’”

Suggestions from a Manufacturer
Jake Nichol of Stanley-Proto in Covington, Georgia, representing the associate members of STAFDA, urged distributors “not to hesitate to pick up the phone and call their manufacturer’s president.”
“Talk to each other,” Nichol said.
“No one should know your customers better than you,” he added.
Manufacturers and distributors must “know their business so well that we anticipate and not just respond.” ©1994/2015 Fastener Industry News.
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Related Links:

• Specialty Tools & Fasteners Distributors Association