Airlines!!! Keep your eyes on plumbing my friends while FERGUSON pulls the blinders over all of us. I keep reading how internet retailers are the evil of our world because they are a new style of showroom. Articles I read now tell us the web is more costly in advertising than anything we do. It costs millions to operate a big time website these days with 100+ employees. Has anyone paid any attention to FERGUSON's purchase of internet retailer Improvement Direct, Inc aka FaucetDirect.com. They paid close to $60 million for this company a year ago and hide it in the quarterly report. They refuse to but the Ferguson logo on the pages unlike everything else they own. In fact Supply House Times tried to ask Ferguson some questions but got hosed with canned responses and didn't question them. Of course Ferguson pays for half Supply House Times magazines with advertisements. What most people dont realize is that Master Distributors are the evil on the web. The likes of First Supply (ewdir.com), Standard Plumbing (BuyPlumbing.net), Ira Woods, Hirsh (Faucetdepot.com) and Ferguson (FaucetDirect.com) all run disguised websites. Ferguson took the profitable online retailer and slashed prices on the web this month. Everyone knows products are cheaper on the web even though the cost of web operations is skyrocketing to out weight the cost of any showroom. It costs millions to operate. However, they have dropped pricing on the web to be equal or lower then the wholesale pricing that Ferguson offers to its showroom customers. If you look on their site you will even see Ferguson ignore the IMAPS of Hansgrohem Grohe, TOTO and many other brands. Are they so big they can just ignore the manufacturer. Sure looks like it. They sell TOTO at 45% off list. Grohe at 47% off list. Far lower then any other internet retailer. This is the same Ferguson that owns hundreds of showrooms in which sell at higher showroom prices. I have heard from people at Ferguson who claim there is inter corporate competition and fighting. You have the web division undercutting the others. Of course they dont want to tell all the KBIS members that they are selling you out. The risk losing all their clientel or is their ultimate goal to cut out KBIS members and steal your customers directly. KBIS needs to do some investagtive stories to bring this to light and expose what is going on. Once this occurs for long no one will ever shop in a designer showroom.

I'm not sure how my original blog post about United Airlines' customer service pretensions morphed into IMAPA's tirade against Internet marketing wholesalers, but IMAPA's point of view is worth examining further. IMAPA seems to regard it as hypocritical and vaguely unethical that various distributors have tried to secretly play the Internet marketing game while also engaged in high-margin showroom marketing. I think it's simply a matter of business strategy to cover both ends of the business spectrum -- no different than selling private-labeled merchandise alongside premium brands, which is a practice hardly limited to our industry. Everyone from Wal-Mart to Home Depot to smaller grocers, drugstores and other retailers do this. It's all about capturing as many sales as possible. Every wholesaler would rather supply tens of thousands of high-margin dollars worth of fixtures to a luxury remodel project than sell faucets to Internet bargain hunters, but why not do both? For the most part, people looking to buy faucets and fixtures online represent a different crowd than those who visit showrooms looking for product to go into a major bath conversion. As for disguising themselves, I, too, get frustrated at the lack of transparency in our industry. It makes my job as a trade journalist very difficult. But I grudgingly understand why most companies try to keep a low profile. As IMAPA aptly demonstrates, information has a way of leaking out in this industry and secrets don't remain secrets for long. But it's one thing to pretend nobody knows what everyone knows, another to broadcast policies that are guaranteed to generate business controversy, especially when competitors may not be doing it or have plausible deniability. The pricing issue raised by IMAPA may have some merit. I'm in no position to judge the effectiveness or legality of minimum pricing policies enacted by various manufacturers, except to note that they, too, are caught between a rock and a hard place in deciding whether to challenge and/or punish distributors who also may be among their best customers. I appreciate IMAPA for weighing in on this complex subject. I'd love to hear from others as well.

I am well aware of Standard Plumbing's ownership of BuyPlumbing.net since I am a showroom and it is in my territory. Yes, they hid it as much as they could until you do a legal search and find out that the domain name is owned by Richard Reese which is the owner of Standard Plumbing. Supply house times awarded Standard Plumbing the Distributor of the Year Award. Just happened that as of the timing of the award and article that Richard Reese tells Supply House Times that as of the publication of the article, he was in final negotiations to sell the ecommerce site off to someone else. Standard Plumbing was getting into the Master Distributor business. It would be tough to sell to retailers if they were selling against them at wholesale prices via the web. As of today Richard Reese's name is still listed as the registered owner of the website. Someone should follow up on the story to see what really occured. Shipments from Buyplumbing.net still show up with the address of a Standard Plumbing warehouse location. Is this a shell game with ownership of the entity? Meaning all they did was create a new LLC owned by the same members which then in turn buys from Standard PLumbing? There needs to be more transparency here. BuyPlumbing.net still sells at wholesale prices. This tells me that Richard Reese is still running things otherwise they would have to mark things up further to make profit.

I read the article on Ferguson's purchase of Improvement Direct on the website here. IMAPA brings up some interesting points that need investigating. Jim Felton of Ferguson says the strategy was for B2B commerce. I dont see that if they are lowering prices to match Ferguson's wholesale multipliers. Doesn't make sense. FaucetDirect.com's pricing is now lower then a Ferguson Showroom. didn't Circuit City just tank because they had lower prices on the web then their store. I would think Ferguson does more through its local supply houses and showrooms then it does on the web. They are a multi-billion dollar company compared to the $60 million in revenue this website does. Wouldn't there website instead canabolize their own stores and such. Second thing that has me wondering is sales tax. In the article Jim Felton is quoted as saying the prior to the purchase FaucetDirect.com shipped all their products from a Ferguson Distribution Center and that would stay the same. He then goes on to say that they would continue to do so. Now keep in mind that Ferguson is located in every state. I am not a tax expert so can someone chime in here. I may forward to my states dept of Revenue for an answer. Ferguson is in my home town. How is it that if I match their pricing I still lose on sales tax. Is this another egg shell game. Should I incorporate in Nevada instead of UTAH and show that I shipped it from Utah? If the purchase occurs on their website and is shipped to me from Ferguson why is that different then me going over to my local Ferguson Branch. My local Ferguson Branch tells me I have to pay sales tax if I am buying it from them. The branch manager told me he couldn't explain how purchasing from their website could save me on tax. If you go on Ferguson's website and Stock Building Supply's websites there are links to the ImprovementDirect stores to make your purchase. Someone needs to Drill Jim Felton.

The tax issue is a problem for me. If I am a supplier locally, then I am open to competition from Ferguson if they can ship to my same customer and avoid sales tax on Toto. With accounts we require a sales tax exemption form. Doesn't look like FaucetDirect.com requires it if I try and buy Toto. Ferguson is in our City as well. How does this work? My showroom customers have to mark up the product and then charge their customer tax. This is not fair that Ferguson could do this with a website in a different name if it ships from Ferguson at the end of the day. Is this some sort of legal loophole or what?