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An Open Letter from DSI’s Dave Robison Regarding Walmart

October 14, 2010
7
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I never imagined that the protest I did at Wal-Mart would have generated such a stir. I think over 2000 dealers have viewed the two YouTube videos Wow! I want to thank everyone for their comments, phone calls, and e-mails.

I’m all for competition and American free enterprise. But when I hear stories like Wal-Mart moving into a rural community, putting the two grocery stores and the one hardware store out of business, and leaving consumers only one place (Wal-Mart) to buy groceries or driving 50 miles, that doesn’t sound like free enterprise to me.
So what do we do now?

Step One: DSI tightens margins and lowers prices. Manufacturers support distributors with better prices and programs to level the playing field with the Wal-Marts and Best Buys of the world.

Step Two: Distributors (like DSI) educate dealers regularly of what products SKU by SKU are on Wal-Mart’s floor and how to sell around them and make money.

Step Three: The 12,000 independent dealers across America join forces! Create campaign’s to educate consumers that they are making a huge mistake if they buy a TV, a Satellite system or any consumer electronic product without shopping the local guy before they buy.

I believe that if the customers will walk in the door of the local retailer and give them a shot at the sale that you guys will sell more than your share. We must all team up and educate customers to shop the local specialist before they buy.

Let’s see: 12,000 American entrepreneurs vs. Wal-Mart. Seems like I’ve heard the story before. I think it was called David vs. Goliath.

Dave Robison, president of DSI


 

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COMMENTS

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Most Recent Comments:
Tony Cuchiara - Posted on October 15, 2010
Maybe if we try to examine things from a manufacturer’s perspective we might be able to come up with a solution to our problem? Not that I am an expert on manufacturers. Public and private manufacturers are under a lot of pressure. They have several interests that they have to juggle before they can come up with a to market strategy. First there is the consumer. They have to build a product at an affordable price that enhances a consumer’s quality of life. Second you have competition. They have to build the product cheap enough to be competitive in the market place but not so cheap that it interferes with the consumer’s quality of life. So it has to be built good enough to work. At least until the warranty runs out. And last you have the investors. Manufacturers are under a lot of pressure from the investors to grow that investment in which they have been entrusted with. Why else would you invest in a company unless you think that investment was going to grow? So manufacturers are under pressure to sell more products and make more money. So here is where things get sticky. If manufacturer A puts his products into the chain stores and has substantial growth in sales and earnings and manufacturer B does not put his product in chain stores. Then manufacturer B had better find another way to substantially increase their sales and earnings. Or manufacturer B will be severely punished by its investors. If manufacturer B is a publicly traded company then their stock will take a dive and anyone holding on to that stock will be a little ticked off. Ok, a lot ticked. So there is a HUGE amount of pressure to keep up with the Joneses in the manufacturer world. So this is why manufacturers turn to chain store distribution. Not because it is always the best choice. But because their investors demand that they maximize their investment.
Mike - Posted on October 15, 2010
You mention "Wal-Mart moving into a rural community, putting the two grocery stores and the one hardware store out of business". Could you please explain how they did this? How was Wal-Mart able to force people to buy from them instead of the other stores.
Tony Cuchiara - Posted on October 15, 2010
Never let a good crisis go to waste. Just like in 2008 when the world was about to come to an end, purchases of flat panel TV’s have slowed significantly in the USA. Flat panel TV manufacturers are in crisis mode and prices will be declining in the near future. I saw a 15 to 20% decline in my wholesale TV costs in November 2008. Which made me very competitive with black Friday prices at Walmart and Best Buy. I sold more TV’s in the last two months of 2008 than I ever have. The tsunami of price reductions will be coming to independent dealers in the near future because manufacturers need to dump this excess inventory somewhere. DSI has probably already been given most of the crisis price reductions from the manufacturers and has been issued price protection on the inventory they have in stock. Now that we know that price reductions are coming the next question is will the independent dealer be given price protection? Dave since you are taking credit for the coming price reductions, are you going to give your dealer’s price protection as well? Maybe even beyond your normal puny 30 days? Or are you going to instruct your staff to tell your dealers that these are temporary price reductions and there fore you can not price protect them? I think you have a great idea in step number two, in theory any way. Make it so number one. A little Star Trek humor. How is step three any different than what we have been doing for the last 20 or 30 years? Any dealers out there that have not been trying to convince customers to shop there store? We already have collective buying know as buying groups. My solution to this problem is cutting the cost that is required to do business with those 12,000 entrepreneurs. From a manpower perspective it is less expensive for a manufacturer to do business with 1 big box retailer with 1000 stores than 1000 independent dealers. This is why manufacturers have gone to distribution in the electronics industry, because they want to cut their costs. But can a distribution strategy reduce the costs to acquire product for the independent brick and mortar retailer?
Charlie Tappa - Posted on October 15, 2010
The manufacturers don't realize that by selling to the discount chains and dropping their draws on the price to them they are undercutting the perceived value of their own product. Is a JBL product "worth" as much if every store is selling it simply based upon price. Many products require the "hand holding" that only a trained, knowledgeable VALUE ADDED reseller can provide. The best product in the world is of no value if it is mis-used or mis-applied. Mass market discount retailers don't care about the product they sell or the consumer they sell it to. The bottom line is all that is important. Smaller specialized value added retailers need to band together and fight the manufacturers for better service and price parity with the mass market resellers. All the little guys more than equal the volume of all the big guys.
Ray Windsor - Posted on October 15, 2010
Indeed it does start with the manufacturers. Retailers must do their homework and select good supplier "partners". On the other hand it ends with the retailer. As a specialty retailer I know I have a responsibility to not just hope consumers will give me a try. I must provide a compeling reason for them to visit my store, make a purchase decision and then actually execute that decision in my store. Price is always part of the consumer's decission. BUT we have to add value to the transaction where Wal-mart and other big boxes and the Internet "buy now" button can't compete. I advocate that specialty retailers "defragment" and combine the buying groups into one maybe two at most and then present manufacturers and distributors with our own compelling reason to be a genuine partner with the specialty retailer insted of just having a buying and selling relationship with which ever manufacturer or distributor has a lower price. Ray Windsor 949-228-2153
Mark Giovannetti - Posted on October 15, 2010
It all starts with the manufacturer's. Time after time we hear how they want to support the specialty retailers (just look at recent articles in this publication) , only to find that as soon as they have a product Walmart, Target, or some other big box company actually wants to purchase- they conveniently rationalize their decision to go ahead and sell them.
Click here to view archived comments...
Archived Comments:
Tony Cuchiara - Posted on October 15, 2010
Maybe if we try to examine things from a manufacturer’s perspective we might be able to come up with a solution to our problem? Not that I am an expert on manufacturers. Public and private manufacturers are under a lot of pressure. They have several interests that they have to juggle before they can come up with a to market strategy. First there is the consumer. They have to build a product at an affordable price that enhances a consumer’s quality of life. Second you have competition. They have to build the product cheap enough to be competitive in the market place but not so cheap that it interferes with the consumer’s quality of life. So it has to be built good enough to work. At least until the warranty runs out. And last you have the investors. Manufacturers are under a lot of pressure from the investors to grow that investment in which they have been entrusted with. Why else would you invest in a company unless you think that investment was going to grow? So manufacturers are under pressure to sell more products and make more money. So here is where things get sticky. If manufacturer A puts his products into the chain stores and has substantial growth in sales and earnings and manufacturer B does not put his product in chain stores. Then manufacturer B had better find another way to substantially increase their sales and earnings. Or manufacturer B will be severely punished by its investors. If manufacturer B is a publicly traded company then their stock will take a dive and anyone holding on to that stock will be a little ticked off. Ok, a lot ticked. So there is a HUGE amount of pressure to keep up with the Joneses in the manufacturer world. So this is why manufacturers turn to chain store distribution. Not because it is always the best choice. But because their investors demand that they maximize their investment.
Mike - Posted on October 15, 2010
You mention "Wal-Mart moving into a rural community, putting the two grocery stores and the one hardware store out of business". Could you please explain how they did this? How was Wal-Mart able to force people to buy from them instead of the other stores.
Tony Cuchiara - Posted on October 15, 2010
Never let a good crisis go to waste. Just like in 2008 when the world was about to come to an end, purchases of flat panel TV’s have slowed significantly in the USA. Flat panel TV manufacturers are in crisis mode and prices will be declining in the near future. I saw a 15 to 20% decline in my wholesale TV costs in November 2008. Which made me very competitive with black Friday prices at Walmart and Best Buy. I sold more TV’s in the last two months of 2008 than I ever have. The tsunami of price reductions will be coming to independent dealers in the near future because manufacturers need to dump this excess inventory somewhere. DSI has probably already been given most of the crisis price reductions from the manufacturers and has been issued price protection on the inventory they have in stock. Now that we know that price reductions are coming the next question is will the independent dealer be given price protection? Dave since you are taking credit for the coming price reductions, are you going to give your dealer’s price protection as well? Maybe even beyond your normal puny 30 days? Or are you going to instruct your staff to tell your dealers that these are temporary price reductions and there fore you can not price protect them? I think you have a great idea in step number two, in theory any way. Make it so number one. A little Star Trek humor. How is step three any different than what we have been doing for the last 20 or 30 years? Any dealers out there that have not been trying to convince customers to shop there store? We already have collective buying know as buying groups. My solution to this problem is cutting the cost that is required to do business with those 12,000 entrepreneurs. From a manpower perspective it is less expensive for a manufacturer to do business with 1 big box retailer with 1000 stores than 1000 independent dealers. This is why manufacturers have gone to distribution in the electronics industry, because they want to cut their costs. But can a distribution strategy reduce the costs to acquire product for the independent brick and mortar retailer?
Charlie Tappa - Posted on October 15, 2010
The manufacturers don't realize that by selling to the discount chains and dropping their draws on the price to them they are undercutting the perceived value of their own product. Is a JBL product "worth" as much if every store is selling it simply based upon price. Many products require the "hand holding" that only a trained, knowledgeable VALUE ADDED reseller can provide. The best product in the world is of no value if it is mis-used or mis-applied. Mass market discount retailers don't care about the product they sell or the consumer they sell it to. The bottom line is all that is important. Smaller specialized value added retailers need to band together and fight the manufacturers for better service and price parity with the mass market resellers. All the little guys more than equal the volume of all the big guys.
Ray Windsor - Posted on October 15, 2010
Indeed it does start with the manufacturers. Retailers must do their homework and select good supplier "partners". On the other hand it ends with the retailer. As a specialty retailer I know I have a responsibility to not just hope consumers will give me a try. I must provide a compeling reason for them to visit my store, make a purchase decision and then actually execute that decision in my store. Price is always part of the consumer's decission. BUT we have to add value to the transaction where Wal-mart and other big boxes and the Internet "buy now" button can't compete. I advocate that specialty retailers "defragment" and combine the buying groups into one maybe two at most and then present manufacturers and distributors with our own compelling reason to be a genuine partner with the specialty retailer insted of just having a buying and selling relationship with which ever manufacturer or distributor has a lower price. Ray Windsor 949-228-2153
Mark Giovannetti - Posted on October 15, 2010
It all starts with the manufacturer's. Time after time we hear how they want to support the specialty retailers (just look at recent articles in this publication) , only to find that as soon as they have a product Walmart, Target, or some other big box company actually wants to purchase- they conveniently rationalize their decision to go ahead and sell them.