do we dont we ?

[Del]

With regards setting up a few limited regional distribution centers to help us shift ISE machines in more volume to rural areas is this up for consideration ? yes or no, as we have to have a policy one way or the other.

I am phoning hundreds of agents a week and certain oppurtunities present themselves so I need to be able to strike whilst the iron is hot.

An example presented it’s self today whilst talking to a guy in Truro who is willing to support the brand and act as regional distribution centre for all of Cornwall. He is also more than willing to promote the brand to his trade customers, as he is a main spares and appliance supplier to the trade in his area.

He is also willing to allow us to use his premisses to train all the local repairers in his area.

In the original concept for ISE Appliances it was stated that we could only deliver within the Newcastle, Carlisle, Bristol, London Box. To the best of my knowledge the fact that we can now get logistics nationwide is a fact only known between ourselves. Therefore do we not have a reasonable argument to allow for regional distribution outside of this area.

I can live with a decision either way but that decision has to be taken so that we all have an idea of our stated policy. I’ll put me tin hat on now and retire to me foxhole.

Sean

[admin]

Re: do we dont we ?

No need for a tin hat… 😆

Good title by the way.

This is my view on the idea of distributors.

I am fully on board with the idea in principal. Where we have rural locations and out of the way places, I can see that distribution will be speeded up by having such a distributor. There are a few facts and figures we need to look at, but I’ll save that for later.

First, let me say: Data at Yeovil could well be a fine choice of Distributor, what follows has nothing to do with them or any one of us, it is purely my perspective on the situation.

The profit margin on a single ISE is £53.80 plus Vat. Out of that we have to meet our expenses, as we grow those will undoubtedly increase. But for now they are fairly limited to;
1) salary and on costs
2) expenses
3) new agent recruitment and training
4) directors salary and expenses in relation to tech training
5) Admin and accounts including stationery.

This limited exposure is unrecorded as yet as we do not have a full months figures to work with, but I expect £10,000 per month to typically cover these costs.
A simple sum provides a sales figure required to cover our expenditure, thats 185 appliances, per month, thats a break even point we should be aiming to achieve asap.

John has been in the job for a couple of weeks and is doing exactly what we require, expanding our agent numbers, supporting our existing sellers and getting to the point with Beko and CDA. Along the way he has also increased sales, cemented our credibility with the tech follow ups and increasing our exposure to real retail outlets. I think John with our support will be a huge success and with a target of 5 sign ups a week the difference he will make to sales figures will show come the end of June.

Our primary objective was to sell this idea to small businesses, to support them and ensure they and we profited from the association. Fine.

The idea of appointing a distributor who has access to 20 trade accounts, who sells to them on a daily basis, is indeed attractive. I can see the possibilities as well as the potential loss of profit margin. As we propose to extend an extra 10{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} to the distributor, this impacts as 60{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} of our profit margin, meaning that the distributor invokes the following ratio:

For every sale we make the distributor has to sell 2.35 for us to achieve the equivalent profit. Fact.

So in answer to the volume question, the above ratio has to be factored in and indeed used.
Therefore, as we are about to train(detergent training) the assembled repairers in Yeovil as well as introduce the ISE concept to them, the following is true:

If there are 20 repairers, we only have to capture 8.5 of them into the ISE programme. With 8.5 our hypothetical sales are the equivalent of the distributors. The factor of 2.35 would be applicable, no matter what the number of repairers.
Therefore a distributor has to sell in excess of 2.35:1 ratio for us to not be disadvantaged by our extra 10{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} discount. After all we started this to make money, not give it away to others.

Therefore my recommendations are:
1) A distributor has to have a contract which includes terms and conditions.
2) Within those terms has to be a bulk buy clause, that is a minimum order value of 10 appliances, with no credit facilities extended, payment with order.
Let me explain that this impacts in the future if and when we assume the role of distribution, the bulk order is one delivery per 10 and not 10 deliveries of 1, allowing bulk delivery profits for us in lieu of the 10{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} discount.
3) A single warranty policy,ie all at 5+5, getting rid of the confusion waiting to happen with the distributor and or his agent cocking up.
4) The distributors customers have to be vetted and trained by us, period.
5) We retain the right to not appoint a seller, to stop a seller from continuing in the case of irregularities.

There’s a few to get you thinking.

Also I think we should fully consider the answer we give to others who will want the extra discount, once they hear about it.
The logistics we have at present does include nationwide delivery, we have been delivering outside the box, already, without extra charge to anyone. We can hardly play that card and risk our credibilty upon being caught out. Whilst some rural delivery is once a week, rural expectations are also on a par with this.

To sum up.
I think the idea is good, but too soon for our finances, we need to exceed break even point before we start cutting our margins. We need to produce a working agreement that protects both parties in the distribution chain. I think Data could be operated as a pilot scheme to allow us to learn and adapt a proper “agreement”. Therefore if this idea was adopted we will need further disscussions with Data to identify the way forward. And finally, we need to discuss ideas and roll them out in a uniformed and documented manner, not decide policy on the hoof.

Cheers

Kevin

[kwatt]

Re: do we dont we ?

I think there’s equal arguments both for and against, pros and cons to both using distribution and not and there simply aren’t any easy answers.

Kev makes some very valid points and they are more than worthy of consideration IMO.

I believe that the whole first section on the worry about cost/impact of sales through a distributor is slightly flawed though as it assumes that we would attain those same sales directly and that is clearly not going to be the case. It would be probably in some percentage of the sales I should think but I doubt we’d achieve anywhere near the penetration into local businesses that a local distributor would to smaller businesses that have a personal relationship with the repairers.

So I see and take the point, but still I fail to see how we can lose profit margin on sales that we do not have. If we make any money at all on sales that we would not have otherwise have got then, to me, it’s better than a kick in the gonads and having appliances sat in a hangar in Langar or free of charge at a business with no traffic to move them to. Putting appliances somewhere that they get some exposure to the small traders strikes me as far more sensible.

If you go on assumptions then let’s assume that the 5 accounts a week sell 1 machine a month on average. That’s only 40 a month building exponentially so it would take approximately 5 months to start achieving target. But obviously that premise is also fundamentally flawed as you can’t predict volume until you have history and we don’t have that.

But that aside, let’s look at what we’ve discussed in the past, putting machines out the country. We make, at best, about £30 a box with no responsibilities on warranty. We all agreed that was okay.

But from that we will ever generate any warranty work, any spares sales, any agents or claw back from the warranty pot at the back end. If the failures in warranty were ~5{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} and those machines to boost volume were instead filtered through a distributor then we get 10{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} mark up in front and the chance to claw back later, we don’t get that by dumping. We also get the longer term advantages mentioned at the start of this paragragh.

Okay, so it’s pain in the short term, but think further ahead.

Once we hit the magic number we’re gonna swipe it all away from CDA – fact.

When that happens and, it will, then we may well actually need these guys to bail us out but apart from that we also claw back still more margin which makes the whole thing more attractive to us. Problem is that if we’re obstructive now then that may well come back to haunt us later.

To go through your list, first cursory thoughts are…

Kev wrote:1) A distributor has to have a contract which includes terms and conditions.

Agreed, I think that’s an extremely sound plan.

Kev wrote:2) Within those terms has to be a bulk buy clause, that is a minimum order value of 10 appliances, with no credit facilities extended, payment with order.

That will kill it. No distributor in their right mind would agree to that, typical “end of month” terms are the norm.

Kev wrote:Let me explain that this impacts in the future if and when we assume the role of distribution, the bulk order is one delivery per 10 and not 10 deliveries of 1, allowing bulk delivery profits for us in lieu of the 10{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} discount.

Don’t get me wrong I see exactly what you’re getting at and I fully appreciate what you’re saying but we’re proposing to sell an appliance that, in many people’s eyes, is over-priced and there’s no argument to get a distributor to buy on those terms with the alternatives available from known and far easier to shift brand names.

Kev wrote:3) A single warranty policy,ie all at 5+5, getting rid of the confusion waiting to happen with the distributor and or his agent cocking up.

I agree, that seem a sound idea and saves any confusion. It also allows us to sell the other package direct and poaching the account direct, thereby increasing the profit in the process.

Kev wrote:4) The distributors customers have to be vetted and trained by us, period.

Agreed, if they want to retain their own service. If, like any retailer they simply want to sell we must leave the option open to pass any service work to either Level 1 or to a local repairer, like the Jim Banks/Star arrangement.

Kev wrote:Also I think we should fully consider the answer we give to others who will want the extra discount, once they hear about it.

I think you’re getting too hung up on this. In the end who cares? It’s a distribution deal, it’s not some silly margin that they’re getting and who are they gonna tell anyway? Even if it did get out into the open, so what, every manufacture has a distributor price, almost without exception as it is an accepted way to distribute. I dont think anyone’s stupid enough not to realise that the distributor makes a margin.

We said we wouldn’t discount to retailers, the sheds being the main target of that, but a regional distributor is not a national chain nor is it solely a retailer. Without trade sales to support the distributorship we would have to take a decision on whether to pull the plug or not based on what we see.

I also think that each has to be taken on its own merit. Assigning a set of rules only rules out flexability, a framework to work to is more appropriate I feel which allows us to manuvere some but still work within guidlines.

I think it’s worth a whirl, we’ve nothing to lose IMO as we’d likely never have had the sales anyway so there’s no loss there and, to me, it’s far better than dumping out of the UK, especially for us in the longer term.

I don’t think that the volumes will be huge, but I do think it would move a bit of volume on a more regular basis.

I do think it requires some guidlines in place and a bit of thought.

I don’t think that, in the longer term, that we really have a choice if we want to reach many smaller localised businesses.

Given that and the areas currently under debate, I’d have to say that this could be an ideal opporunity to learn and to found a solid working framework for distribution channels like this.

But of course that’s only my opinions.

K.

[admin]

Re: do we dont we ?

I’m not sure how “dumping” comes into this discussion.

CDA are ok with the present levels of stock. To quote Ian Kershaw, “I am quite relaxed now that I have been shown how you are to expand the sales, and I know you’ll sell the appliance”. The last part was directly aimed at John during the meeting we had with CDA.
It was agreed then that the present warehouse levels would start to address themselves by the end of June.

We all know that we have created our own problems to a degree:
1) we failed to deliver on van stock
2) we failed to deliver on tech info and spares info
3) our user manual is pants.
4) we haven’t kept our initial sales agents interest.
5) we have been cagey with what info we have released, to avoid wdiscussions on subjects we couldn’t answer.

We all know that 90{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} of our problems are or were with the CDA administration.
So within 3 weeks, John with our support has identified problems, sorted solutions and we are close to actually being able to proudly say:
1) We have technical
2) We have Spares and order info
3) We have a functioning web site
4) We have a training team, who can and will visit you with 1st line support.
5) We have logistics throughout the country.

I’m sure we can think of more.

Therefore, I am for exploring one of our core principals, first. That is exploring the possibilities of expanding our own network, with our own agents direct. Why? Because they are more profitable to us, we can go the extra mile for them as they generate the profit we need to support them.
In the case of Yeovil, why are we happy to assign an area over to a distributor before we have tried to get our own agents 1st? Within a 40 minute drivetime around Yeovil there are 27 agents who advertise in the Yellow Pages with more businesses in the area who don’t. Therefore I think we should capture all the agents we can before we assign them over.
To accept we can not match the sales of the distributor without seeing what we can do 1st, when we are on a 2.35:1 ratio seems daft to me.
Yesterday 1 of Johns contacts bought 3 appliances, at the same time 5 appliances turned up from Whirlpool, he explained he did lots of sales into landlord and letting agents. He wants ISE to be the replacement for his Whirlpools. How are we going to find these guys if we don’t go and look for them? I’m sure Yeovil will have a mixture of businesses, I’m sure some of the one man bands will love a distributor close to hand, I’ve no problem with that. I just don’t want to hand over the guys who have premises/shops who will stock and sell without the distributor.

We have no pressure on us to “dump” or start up a distributor without searching for our business ourselves. We are increasing sales agents and the truth is we have only just started. I think it would be wise to reflect on what we are doing, stick to our objectives to the end of June whilst the “Distributor Contract” is agreed and formulated. Once we have swept an area, such as Yeovil for the shops ect, we can then look for distributors to catch the smaller guys.
I certainly can’t agree to giving away customers (before we try) and with that 60{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} of our profit margin.

Kevin

[Del]

Re: do we dont we ?

A lot of the Gripe here is that local distributors may well end up making more than ourselves per unit sold. But that is only on the assumption that they will recieve a 10{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} discount as per trade morms.

If we were to insist that those people that we set up as local distributors were level 1 service providers to ISE in thier appointed areas then they would already recieve the bennifit of having all the installation work and repairs on all appliances we sell directly from the website and may be required to carry stock to fullfill this requirement for us, based on numbers of average sales in thier area.

They would have stock to both sell themselves and support level 2 agents in their area who do not have storage capacity. In much the same arangement that we already negociated with the likes of Create in Liverpool

So why the 10{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} {e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} ?

That way we retain margin whilst still benifitting from local storage, and let the level 2’s pick up thier own machines from the level 1.

Level 1 get’s free display we get free local distribution & storage

Ipso facto problem solved 🙄

Sean

[kwatt]

That would only apply where they had servicing cabability though Sean. 😕

K.

[Del]

Re: do we dont we ?

But that aint a problem Ken, we just select the ones that want to be level 1 and make it a condition.
It’s a win win option for them, and will encourage them to work more closely with the smaller guy’s who in turn might be able to help them out at busy periods and holiday’s or if they have guy’s off ill.

Isn’t that what were trying to do at UKW, get the trade to work with one another ?

Sean

[kwatt]

Re: do we dont we ?

Yeah that is what it’s about, I just don’t see how in some cases it would work. Although I have a thought or two, I need time to mull it over a bit.

As for dumping and meeting the requirement on volume, I don’t trust Kershaw at all, especially in light of recent events. Added to which we have had the delivery issues which could cause a major problem.

K.

[derbyhoppy]

Re: do we dont we ?

I have discussed this subject with you all and now had time to reflect on what I feel the best course of action is.

It’s a straight trade off lower margin for higher volumes. The real quetsion is does the volume increase offset the margin loss? The answer is none of us can say for sure.

In my view circumstances have presented us with an opportunity to test the water by taking on the cornwall guy as a distributor and trying to deal directly in somerset.

By doing this trial we should have fact to use as a backcloth to challenge our collective gut feel.

If this is acceptable let me know and I’ll have the conversation will SW appliances

Cheers

John

[Del]

Re: do we dont we ?

My own opinion is to trial it in Cornwall, as everyone must accept that this is a pretty remote and rural area.

I know that kev has counted the number of agents in Cornwall off of the data base but believe me Kev there simply isnt as many as you think due to the age of the info on the data base. In fact two of the guys on it have actually been retired for the last five years.

Also I would only offer them 5{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} with a free display machine as they are both capable and willing to be no 1 level service provider in Cornwall and as such would recieve installation and service work on all machines sold from the website.

Remember John 5{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} is just as good a deal on a well specified dearer product than 10{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} is on £195 piece of junk.

They already told me they were willing to support the brand and allow guys to pick up machines from them provided we gave them a display model. They are also willing to allow us use of thier premisses to train the local guys, and I didn’t even mention trade discounts to them !

So as far as they would be concerned the 5{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} would be a bonus. So i would also ask them to always keep two in stock ready to go

Appliance World (SW) LtdUnit 32 Threemilestone Industrial Estate, Threemilestone TRURO Cornwall TR4 9LD
01872 225990
Mr Nigel Dilly
repairs@applianceworldsw.com

As ever JMHO

Sean

[Dave_Conway]

Re: do we dont we ?

Everything we’ve done has been a trial of sorts as we are all learning, another one won’t hurt 😉

Go with Cornwall IMO and see how it goes, a 3 month reviewable period perhaps ?

Dave.

[admin]

Re: do we dont we ?

Yep, I’m all for a trail period and 5{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} 😆 sounds good to me, but then again it would 😉

It would be handy to know what business these guys reach, just a thought.

Kevin

[Del]

Re: do we dont we ?

Nigel Dilly told me that they cover the whole of Cornwall Kev.

[derbyhoppy]

Re: do we dont we ?

That’s great

I’ll phone Nigel Dilly and start the bidding at £10 per machine rather than talking {e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} I’ll walk away if he wants more than 5{e5d1b7155a01ef1f3b9c9968eaba33524ee81600d00d4be2b4d93ac2e58cec2d} £16 per appliance.

Will the outcome later

Cheers

John

[Author]

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