EDITORIAL: Are Counter Sales Costing You Money?
Some information is so stunning that one’s first instinct is disbelief - like looking at the baseball standings and seeing the Chicago Cubs in first place.
A similar jolt came over this reporter while absorbing a recent tidbit in Scott Benfield’s e-newsletter (www.benfieldconsulting.com). Benfield, a well-known distribution consultant, told of performing an activity costing study finding that most counter sales lose substantial amounts of money. This is (sorry) counter-intuitive considering that pickups avoid a lot of sales and shipping overhead and frequently are cash transactions. Benfield said that even with gross margins upwards of 40%, counter sales consistently lose money.
“Why? The simple reason is their small transaction size,” he explained. “A counter sale of $50, at a 40% margin, only leaves $20 for the other processing that goes on inclusive of purchasing, receiving, put away, storage, picking, invoicing and the counter seller.”
If he’s right, and we have no reason to doubt the brainy consultant’s data, his findings represent a balloon puncturing on the order of the Hindenburg disaster as far as PHCP wholesalers are concerned. That’s because nothing puts a smile on their faces more than a bustling counter. It brings to life the business of wholesaling in a way that a stack of faceless paperwork orders cannot. In fact, there’s a lot of competitive one-upmanship going on around the industry among supply houses to provide increasingly upscale food, beverages and other goodies to entice counter customers. Could that prove to be (excuse me) counter-productive?
Benfield cited a visit to an industrial distributor that eliminated its counter with “fantastic results.” I doubt this solution will resonate with many Supply House Times readers.
Supply house pickup counters are a deeply imbedded industry tradition that serves social as well as commercial ends. Plumbers and fitters go there not only to buy stuff, but to network and feed. Truth of the matter is that a lot of their employers grumble about the creature comforts provided for them as a drag on productivity. Yet, it’s rare for a contractor to pull business from a supply house over this issue. Small shop owners themselves tend to socialize at the counters. Eliminating the pickup counter likely would erode a wholesaler’s competitiveness and cause rivals to tout their pickup service more than ever. And it wouldn’t be just unprofitable business slipping away.
A better solution to the dilemma pointed out by Benfield would be to step up training of counter workers in upgrade and add-on selling to pad those money-losing orders into profits. This is nothing more complicated than imitating the fast food industry’s mantra: “Do you want fries with that?”
In fact, with the trend toward upscale food service at supply house counters, some might adopt that mantra word for word.
Another Reason To Love This IndustryOur July issue included a painfully penned apology from me for misidentifying SWA President John Landrum as “Scott” Landrum on our June cover. I had intended that to be the last word before putting this embarrassment to rest, except a postscript is in order.
John Landrum and his SWA colleagues reacted with graciousness and humor. I received a heartwarming e-mail message from John shortly afterward telling me to keep my chin up. Naturally, it was signed, “Scott Landrum”! At this summer’s SWA Convention, attended by Publisher Scott Franz, his name was listed as “John Franz” on a golf cart he shared with playing partner “Scott Landrum.” One social function had all attendee name badges identified with the first name of “Scott.”
Then, after our July edition came out, I received several phone calls and e-mails from readers who were moved by the public apology and telling me not to let it get me down. This meant a lot to me. I can’t say I’m really surprised by this outpouring of understanding from industry friends, but it was the last thing on my mind after our blunder in June.
People in our industry have little tolerance for phonies and deceit, yet an infinite capacity for forgiving honest mistakes. I guess I’ve always known that, and while I’m still a bit shell-shocked about the goofy mistake, its silver lining was the opportunity to uncover yet more evidence of the classy people that inhabit our industry.