Why Does the Pratice of "Skating" Copiers Still Exist? Who Wins Who Loses

 

Earlier today I had a call from another rep that works with me. He was pretty upset that a client was able to find the same MP 3555SP for sale on the web for $300 or so dollars under his sales cost.  What even bothered him more was that the reseller was not an Authorized reseller for Ricoh, nor Canon.  

Which leads me to who is this web company buying the new  MP 3555SP from? That web company (non authorized reseller) is buying the MP 3555SP from an Authorized Dealer. Most if not all dealer agreements with manufacturers have a paragraph that strictly forbids the Authorized Dealer to resell copiers to a Non-Authorized Dealer.

The term that we used back in the eighties for this practice was "skating" machines. It's a channel process that has been going on for decades in our industry.  It's one of those naughty little secrets of our industry. No one wants to talk about it, because almost everyone's pay check is tied to how many boxes are sold.

Manufacturer Reps

Let's take a look at the role of the manufacturers rep. The manufacturers rep interacts (sells) with the local dealer principal(s).  I would hope that most don't have this issue or most don't know that the practice of skating copiers is taking place with one of their dealers.  But, what if they do know that the dealer is skating copiers?  Would they risk cancelling that dealer and then lose all of that business?  Dealer reps have quotas also. That's a really hard decision that affects the pocket and the family.  Would it be so bold to think that some may turn a blind eye to this practice?

Authorized Dealers

Almost every Authorized Dealership has a quota from their manufacturer.  Usually that's a annual revenue amount. If you hit that annual revenue amount, there may or may not be back end discounts, dealer trips or cash back.  

Authorized Dealers that have these non-authorized resellers in their Authorized Territory (usually a defined geographic area) are taking placements, revenue and profit away from the Authorized Dealer. Most Authorized Dealers are running a legit business with legit overhead. 

Authorized Dealers Who Skate Copiers

I understand that every Authorized Dealer wants to maintain or exceed their quota. In some cases, the higher the dealer quota, represents lower copier pricing from the manufacturer. When a dealer obtains that annual quota many of the manufacturers offer exclusive dealer trips. In addition there may or may not be back end dealer cash incentives.  All of these perks can make a dealer think twice about skating copiers to another re-seller that is not authorized by the manufacturer.  If a dealer can generate another two hundred thousand dollars with skating copiers, it helps them obtain their quotas. In addition it keeps those back end rebates (profit).

Dealer Sales Reps

I'd like to refer to dealer sales reps more like waiters and waitresses. We can't live on the salary that's provided to us and the commissions with selling  is what feeds and supports our families.  We have a cost that is marked up (MU) from the dealer. It's not a large MU, and then most sales reps get a percentage of the gross profit when the copier is sold higher than the MU.

A recent quote for a MP3555SP delivered and installed was about $6,000.  Which is considerably under MSRP.  I have no problem with people who want to do their research on a product.  Even those looking for the best price, because I know you can't get the best price and the best service.  However there are those that will search pricing just to make sure they are getting an OK price. We all do it.

Thus, what our rep called about was that a prospect did a google search for that device and hit a price of $4,149 for the same unit. That's almost a two thousand dollar difference.  What's the prospects first thought?  Wow, this dealer is ripping me off.  We'll we're not, but the perception is there that the price found on the web should somewhat be an average price.

Sales reps then need to try and educate the prospect on what they are seeing on the web. Which is a non-authorized reseller, which has no service or support department.  Where is service and support coming from, will it be coming from a fly by night technician, a non authorized technician. What happens where there is a real technical issue with the copier and client can't engage with the manufacturer. Some will see the light and most won't. The rep is then forced to either walk away and make nothing or take a lower price with lower commissions.

Clients

Ah, the ones that get duped the most.  That low, low price is too good to be true.  I've heard stories of that they non authorized reseller will tell the buyer/client that the copier they want does not come with an automatic document feeder, when it fact the document feeder is a standard feature. That reseller then charges and additional $1,000 for the document feeder.

Pricing does not include installation, network installation, training, removal of existing device, nor service, or supplies.

Who will perform that installation? A fly by night tech, a non-authorized tech, a non authorized dealer. What happens is there is a real issue with new copier, where is the support going to come from.  Many issues that will result in a higher cost and a feeling that the client/buyer was duped which leads to a bad rap about the manufacturer.

Manufacturers

Two years ago, I made a call to my manufacturers reps about two web sites that were offering their copiers at prices that were below dealer cost. I followed up a few times and finally gave up because I saw that the issue was going no where.  The manufacturers want to move boxes also, but at what cost?  Lately many manufacturers are touting "we love our dealers". That's something I want to believe, however why not try putting your foot down and stomp out those that are not authorized?

There's a very simple solution to this problem.  Have someone from the manufacturer buy a copier from the non authorized reseller. It could be done in stealth mode with a credit card and ship to a warehouse.  When the copier arrives the manufacturer can then use that serial number to find out what dealer acquired that copier from them.  Max, it's maybe a three thousand dollar investment, is that too much to pay to help your dealers stay profitable?

On the other hand what happens if the serial number kicks back to a very large dealer?  Will the manufacturer revoke that dealer agreement for the skating of copiers to non authorized resellers? Especially when that dealer is generating millions of dollars in annual revenue?

Every One Loses Except.....

for the non-authorized reseller that is buying the copiers from the Authorized Dealer!

Isn't it about time that we took a stand and have the manufacturers cull the herd?

-=Good Selling=-

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dimaxusa posted:

Manufacturer and the non-authorized reseller are the winners. And I believe that because everyone gets paid when a box moves, nothing will change and its going to get much worse. 

A couple years back one manufacturer opened up their entire product line to distribution (85ppm A3).  I'm a dealer of the products and compete against non-authorized sellers and the internet often.  

My advice is to prepare yourself for the conversation in advance. Be ready to talk to the customer about why you should only work with an Authorized dealer. We bring up the fact that we are an Authorized Dealer as part of our USP, because we compete with this so much and this won't be going away, especially as more millennials become buyers. 

Talking Points we use:

- Where do you think this super cheap product is coming from? Is it new?  Is it a damaged return? Isn't it to good to be true? Is it stolen? Its not like anyone has ever been ripped off by an internet company, right?  Besides if something goes wrong you can just drive over to their office and speak with the owner, oh wait. 

- Have you called the manufacturer to see if they'll stand behind the sale from the website your considering (Give them the number to your rep or better yet call the rep from the meeting and put the rep on speakerphone)?

- Discuss the potential security impact and the importance of technical updates, service bulletins, and firmware updates (remember the HP printer hack?). Say you buy this from the website and you install it on your network.  Printers have been hacked and if a security patch comes out, how are you going to know about it, get it installed and protect your business?  What would happen if a hacker got on your network through the copier and you had to explain that the device was bought off a website that was not manufacturer authorized and was unsupported?

To wrap up, as dealers we don't have many options to force the manufacturer to get involved and really stop this from happening.  I think our strongest defense against this is found in our greatest asset, service.  If a customer buys something from another company, they do not receive the same service discounts or SLA that one would get when acquiring products from our dealership. 

all great points and ty for the comment.  

Manufacturer and the non-authorized reseller are the winners. And I believe that because everyone gets paid when a box moves, nothing will change and its going to get much worse. 

A couple years back one manufacturer opened up their entire product line to distribution (85ppm A3).  I'm a dealer of the products and compete against non-authorized sellers and the internet often.  

My advice is to prepare yourself for the conversation in advance. Be ready to talk to the customer about why you should only work with an Authorized dealer. We bring up the fact that we are an Authorized Dealer as part of our USP, because we compete with this so much and this won't be going away, especially as more millennials become buyers. 

Talking Points we use:

- Where do you think this super cheap product is coming from? Is it new?  Is it a damaged return? Isn't it to good to be true? Is it stolen? Its not like anyone has ever been ripped off by an internet company, right?  Besides if something goes wrong you can just drive over to their office and speak with the owner, oh wait. 

- Have you called the manufacturer to see if they'll stand behind the sale from the website your considering (Give them the number to your rep or better yet call the rep from the meeting and put the rep on speakerphone)?

- Discuss the potential security impact and the importance of technical updates, service bulletins, and firmware updates (remember the HP printer hack?). Say you buy this from the website and you install it on your network.  Printers have been hacked and if a security patch comes out, how are you going to know about it, get it installed and protect your business?  What would happen if a hacker got on your network through the copier and you had to explain that the device was bought off a website that was not manufacturer authorized and was unsupported?

To wrap up, as dealers we don't have many options to force the manufacturer to get involved and really stop this from happening.  I think our strongest defense against this is found in our greatest asset, service.  If a customer buys something from another company, they do not receive the same service discounts or SLA that one would get when acquiring products from our dealership. 

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