Material pricing, what's up with that?

[Scott Shepherd]

Just sharing a recent encounter that I thought had me in the twilight zone. Went to a material supplier, paid $78 per unit for some items. Talked to someone else and they tell me that they get it for $50 per unit from the same place. Humm....

I call and they tell me I don't get the $50 price because I don't buy enough from them. Huh? Well, if your material is $78 a unit, then I can see why I don't buy much from you. It seems as we're in a Mexican Standoff. They won't lower my pricing until I buy more from them, and I can't buy more from them until they lower their price.

I even asked them why I should buy anything directly from them, when I can call the people that get it for $50 a unit and buy it from them cheaper than I can if I were to buy it from them. That seemed to really puzzle them and they didn't have an answer for that one.

I have thought about it for some time now and it's really a bizarre business practice to me. Obviously if you're pushing the limit on what you charge me, why WOULD I shop with you? However, if you gave me good pricing all the time, I'd probably buy everything I could from you.

I think this is one of those two decade old policies that no one ever questions.

Am I missing something here? How can I become a good customer if you won't treat me like one? :confused::confused::confused:

[glenn bradley]

Your first mistake was looking for common sense. My condolences. Is it any wonder America can't compete? We refuse to empower our employees to make intelligent decisions on their feet. We believe they will always fail and it is too much trouble to train them so we expect the lowest performance level and get it. Oooops, I almost fell off my soapbox ;-)

[Rod Sheridan]

Scott, many suppliers provide discounts for repeat customers.

I received a generous discount from Felder for placing a third machinery order with them in 2 years, good customer retention on their part.

The discount becomes deeper as you purchase more of a single item in a single transaction, or if you arrange to buy 1,000 hinges a month, they'll often give you the price break for 10,000 hinges.

If you enter into a timed purchase arrangement with them, they'll probably give you a deep discount, without having to pay high initial prices.

Regards, Rod.

[Michael Wetzel]

I see that at work with our suppliers.

Average Joe can order something for $75
A "special price" flier goes out to current customers for $65
I do a lot of business with them and my price is $55

A local lumber yard used to give me a contractor discount because I did a lot of business with them. But I was making it worth their while too. You can not expect the same discounts/perks as someone else spending 30x what you do.

[Dave Anderson NH]

Everything in business and industry is based on quantity purchasing at some level. Retail stores and more particularly chains of stores offer lower prices because they have the clout to demand lower pricing from their suppliers. In industry it is common practice to have bracket pricng,such as 1-10=$1each, 11-25=$.80ea, etc, etc. Volume production generally produces a lower per unit cost in manufacturing and the effect is magnified by being able to purchase raw materials at discounted or bracketed pricing. It's unfortunate, but it is a fact of life that the low volume customer is moree expensive to service and hence has to be sold at a higher price. No offense Scott, but that is the way it has always been and almost certainly will continue to be. Your best recourse is to see if you can plan your requirements (and if you can afford it) make fewer and larger buys.

[Jim O'Dell]

Scott, maybe ask them what their levels are for purchases. How much is required purchase wise to get the better pricing? Otherwise, purchase from people that get the better price if they will pass some of that savings on to you. Or find someone else in your shoes and see if together you can qualify for the bigger discount. Jim.

[Scott Shepherd]

See, that's where I totally disagree with some of you. I've been in manufacturing (and still am) for over 20 years. Probably 25 years now. Heck, just figured it out, 27 years now! So I'm well aware of setup costs, etc.

What I'm having a problem with is that there's a stack of these materials sitting there. They haven't had any special setup costs. It's a stack of material. How can a stack of material that's already been paid for have every sheet be a different value? It would be like going into Lowes and all the bolts would have a different value depending on who you are.

I did ask where the pricing point was that I needed to get to and I was told when I did $30,000 worth of business with them, my pricing would come down.

Ummm.....if you're selling the material to me for 56% more than someone else, then I'm probably not going to be in business selling products I need your material for. You're giving someone else a 56% advantage in pricing over me. So either I have to make less or charge more. If I charge more, I don't get the job. If I make less, then I have to work longer to make the same money. If buying from you means I have to work longer to make the same money, then we're not really into a partnership are we, since it seems you're making 56% more than you normally do and I'm making 56% less on the materials than I could be.

I'm all about partnerships and working together for a common goal, but that kind of logic isn't getting us anywhere. It's making me shop your competition and I can promise you, I'll find someone, somewhere, that's happy to have my business. Then, as I grow, they will grow, as I profit, they will profit. And when my account gets into the $30,000 range, you think I'll magically pick up the phone and cut the throat of the supplier that helped me get to where I am? Not a chance. In fact, I'll make sure I go out of my way to never use you for a single piece of material as long as I am in business.

I'm looking for people to help me, not screw me over, and selling a commodity for variable pricing is not what I consider customer friendly. Now, let me be clear. I am fine with tiered pricing and if I buy one piece versus 100 pieces, I understand that can make a difference. But it's normally 20% or so between the high and low. I even said to the guy, "50%, really? You're trying to tell me that there's a 50% variance in your pricing structure? That sounds like the difference between retail and wholesale, not a tiered pricing issue".

He was silent and then fumbled for words and then I said "50%", again. He admitted it didn't seem right.

You'd think people, in this economy would be trying to build two way relationships. I'm finding that's not the case. They all want a one way relationship and I seem to be on the wrong end of that one way relationship. Well, not actually, since they don't get my repeat business. So it's a no way relationship for them. Yeah, that's good business, let's not work to get new customers!

[keith ouellette]

I agree with scott. I have found this process in all things whether it be wood, paint or plumbing supplies.

I paint some houses each year in the winter. At one time I used sherwin williams paint and didn't pay any more for a-100 paint then I did for a similar grade paint at HD. every time over about a 2 year period after I set up the account they would ask for my account name when it was time to pay and the price was the same. Out of curiosity I called on the phone anonymously and found out the price difference for the same galln of paint was $6 higher without my account.

A painter I knew payed far less than I did. I guess I didn't paint enough because the price skyrocketed. When I complained they said oh well. I said I'll just go someplace else. They were just to expensive.

Someone I knew that worked at another location would pull contractors away from other places with great discounts and then very slowly (as he told me so so they wouldn't notice) raise the price.

The whole thing made little sense unless they only wanted to do business with contractors only. the cost of Sherwin williams paint to some one who walked in off the street for a one time 10 gal of paint was ridiculous.

[Leo Graywacz]

How much are you spending with them a year? $100, $1000, $10,000? If it is below $1000 you are probably just a burden to them. Wholesale is about bulk. They want you to buy a lift of plywood at a time, not 6 sheets. When you buy small quantities they have to work harder for their money. Lets say you go in there and get 3 sheets of 3/4" birch, 2 of 1/2" maple and 2 sheets of 1/4" Maple. Now the guy in the warehouse has to go to three areas in the place and get a lift of plywood down and gather a few sheets. He has to do this 3 times for your order.

At the same time Joe Blow Inc has order a lift of Maple ply. It will take them 1/3 the time to process Joe's order and they will profit much more from it.

That is probably why you are paying the top tier pricing.

[Dave Lehnert]

There can be many factors that translate into who pays what price.
The guy you talked to, that gets the $50 price, could be buying a high volume of another item in the same store. The store could be offering him the $50 price as a loss to keep him as a customer.
I run a retail garden center and offer discounts to some customers. I have one guy who does landscaping for McDonald's. He buys landscape rock from me. Each time, he does not buy any more than Joe customer does but he comes back and buys the same amount over, and over again. He also buys his shrubs and such at the same time and that is where I make my $$$

[Michael Wetzel]

You are thinking with YOUR wallets. If everyone had to pay the same price for everything we wouldn't have any competition. If a Mom & Pop hardware store orders 5 boxes of screws, should they pay the same price as Lowes who buys 5 SKIDS of screws? Volume discounts always have been a way of life.

I spend a lot of time shopping prices for myself and at work. I have accounts at building material companies I really shouldn't have an account at. I wanted an account to order windows/roofing/etc direct, they wanted my $5k and a deal was made. Do I get the same discounts and extra perks of the big spenders? No and I don't expect them either. If I can manage to meet the minimum requirements for kickbacks it is a different story.

[Doug W Swanson]

It's really no different than how every airline works. If there are 140 seats on the plane, I can guarantee you that there are many different prices for those seats. Someone might pay $200 for one seat and someone else might pay $1000 for the seat right next to it.

If you ask me, it's a bunch of BS but it is pretty common to sell that way....

Doug

[Jim Koepke]

This reminds me of one time I needed a part for my pick up truck. I went to the auto parts store on my way to work and was wearing my work uniform. The guy says oh, you work for XYZ, let me give you their discount. Then he says, oh, you don't want their discount, you get a better price by paying cash.

The people I worked for were notorious for being late on their payment and they often payed more for it.

Most of these stores are now run by Ivory Towers that do not have a clue how to treat people. They just want the bucks. One of the big box stores has bags of fasteners all for $0.99. If you look, you will find bags with one 1/2 inch hook or another with three 1/2 inch hooks for the same price. There are people who will still buy the bag with just one because that is all they need at the moment.

The powers that be do not want good workers or managers that think.
One good example of that is one of the big electronics retailers, Circuit City, a few years ago let go all of their long time employees because they were making too much and replaced them all with new lower paid and less experienced staff. They finished liquidating their stores after bankruptcy just this last year. Bite the world on the backside and it will bite right back.

My son in law works at Home Depot. He told me they are going to a staffing of 20-80. Meaning only 20% of the staff will be full time and 80% will be part time. This is so they do not have to pay benefits or pay as much. Guess what will likely happen to the knowledge base in their stores.

I may stop spending money there just on principle. Besides, their quality seems to have dropped on many things of late.

jim

[Scott Shepherd]

I guess I missed that day at Business School 101 when they said "If you want to gain a customer, take advantage of them when they are small and most vulnerable".

I think I must have been sitting under a tree reading a different book that said "If you take care of customers when they are small, they will reward you when they are big".

I understand discount pricing. I get it. I just don't understand variances that large. You're cutting my throat on the job before I can even get the job. So if I have no chance of getting the job, thanks to you, then how do you expect me to buy material from you? Seems stupid to me. Want me to buy material from you? Great, help me get the job by giving me fair pricing. The $50 price for the other guy is good for one sheet. The supplier confirmed that to me. So 1 sheet for them, $50. One sheet for me, $78.

It didn't take any more time for them to take and fill my order than a large one. I loaded the material myself. They keyed the order in, the credit card was on file, in the computer, so in 60 seconds, my order was complete. I put the material in my truck myself.

Jim, I'm only miles away from the Circuit City Headquarters. They had many buildings around here. In fact, I have made leasing signs for some of the now vacant buildings. You are dead right. They got rid of all the knowledge at the expense of cost and now they don't exist. You are 100% correct on that one.

All I want is to be treated fairly.

Let's take this one step further, into my sign business.

If my cost for 1 sign is $400 to a good customer, should I charge a customer that only orders every once in a while $600 for the same sign? To me, I think that's on the borderline of being dishonest. My belief is that you never know who knows who, and when that day comes that two customers talk, I'll be the one that gets fired as a supplier because I was "ripping off" one of them. My price is $400. $400 for you, for the guy next to you, and then guy next to him. Want to order 10 of them, fine, we'll work on a discount. But ordering one, I don't care who you are, the price is $400.

[Leo Graywacz]

They don't want little customers. They want bulk buyers. Do you actually think they really care about you? They care about their bottom line, and if you can't affect it for them what good are you to them?

[mike holden]

Scott,
You do understand that you are agreeing with the store in question dont you?

"If my cost for 1 sign is $400 to a good customer, should I charge a customer that only orders every once in a while $600 for the same sign? To me, I think that's on the borderline of being dishonest. My belief is that you never know who knows who, and when that day comes that two customers talk, I'll be the one that gets fired as a supplier because I was "ripping off" one of them. My price is $400. $400 for you, for the guy next to you, and then guy next to him. Want to order 10 of them, fine, we'll work on a discount. But ordering one, I don't care who you are, the price is $400."

So, your price is say, oh $78 for a sign, and someone orders 10 so you charge them, oh $50 each; or $400 per sign and for a run of 10, $275 each.

In both cases the guy who orders one sign gets a higher price than the guy who buys in quantity.

Not saying either side is better.

Keeping a single price for all means you lose the quantity buyers.

What is missing from the original question is what is the prevailing price for one item?
$50 or $78? If it is $50 then he ought to go elsewhere, if it is $78 (or more) than what is the issue? We are comparing single item purchases versus purchases in bulk - apples and oranges.

Mike

[Scott Shepherd]

Scott,
You do understand that you are agreeing with the store in question dont you?

In both cases the guy who orders one sign gets a higher price than the guy who buys in quantity.

What is missing from the original question is what is the prevailing price for one item?
$50 or $78? If it is $50 then he ought to go elsewhere, if it is $78 (or more) than what is the issue? We are comparing single item purchases versus purchases in bulk - apples and oranges.

Mike

Mike, I'm not agreeing with that policy, I'm the opposite. Perhaps you missed what I said, I did say that it was one piece versus one piece pricing here :


The $50 price for the other guy is good for one sheet. The supplier confirmed that to me. So 1 sheet for them, $50. One sheet for me, $78.



That's apples to apples.

I'd love to be a bulk buyer, but you don't start being a bulk buyer one day out of the blue, you have to work you way up to having enough demand to be a bulk buyer. I can't work my way up to being a bulk buyer if I can't get good material pricing to get the business.

[Dennis McGarry]

To address the question on the stack already being there. Pricing is not done on Per Stack so to speak basis, rather on a per item basis. There COGS figures in shipping, handling, (store personal), overhead, storage etc..

So in essecence you are paying the cost plus profit margin to have 1 item shipped to them to sell to you. A customer who buys in bulk or larger quanties will get the price point lower as it costs less per item now to have it shipped.

That is a simple way to explain it, want a more brain numbing explanation? Grab a micro economics book and settle in for a long painfull night....

Is is fair, yes and no, from the comsumer standpoint no, of course not, but on the reverse of that, if pricing wasnt done like that the Cogs on every item everywhere would be close to double. Most stores know that and use some of the profits on larger items to offset the cost on smaller less sold items that normally wouldnt sell at that price point.

Now in your case it was also bad Customer service which is a problem accross the board. Yes there are price points that need to be meet, but at the same time customer retention must be a factor. Now if you were in my store and this came up I would have explained to you the reasons behind it, then offered a one time discount on that order, expaining to you that it was one time only at this unit price. In doing so I have found that 1, it shows great attention to my customer needs and concerns, and 2 because of that they are more then likely going to come back again, and more often then not with a larger order.

But you see I seem to be a dying breed in the industry. I would rather make 5.00 off someone 500 times rather then 200.00 one time.

jmo

[Scott Shepherd]

:mad::mad::mad: Okay, you are all conspiring against me now, aren't you? Did you call suppliers and tell them I was going off on them? :)

I just went to a company I'll gladly call out. Fastenal. I needed a bunch of stainless hardware. They say "Can I help you?". I say "No thanks, I'm fine" as I walk to the shelf where the screws are.

I'm pulling the trays out, looking at the choices and a guy walks up and says "Finding everything alright?". I said "Yeah, I think so, can I ask you a question? Is that price correct that's right there on the bin? Are these $8 for a package of them?".

He says "Yes, that's the right price, but they'll actually be a little cheaper when I ring them up".

So I get 2 packs of the $8 packages, and 1 pack of a $9 package. Go to the counter and he rings them up.

$44 is your total sir.

"$44, I just got 3 packs and you just told me they were $8 a pack, which is what it said on the bin".

Him- "ummm....that's my fault. I shouldn't have told you that. I can give you a 5% discount".

That'll be $42 sir.

Really? Really? Are you serious? I didn't say that, but that's what was happening in my head at the time. Think I'll buy from Fastenal again? Probably not. Another lost customer. Glad the economy is so great that you can not care about getting and keeping customers.

:mad::mad::mad:

[dan sherman]

I just went to a company I'll gladly call out. Fastenal.

Never Ever go to Fastenal, unless you need something Really Really Bad. They have all kinds of hidden charges built into their pricing. They don't want individuals, they want contractors, machine shops etc that are going to buy in bulk.

Return those things and see if you can find them at enco.

http://www.use-enco.com

PFSNOV free shipping on orders > $25 until December 31, 2009

[Scott Shepherd]

Never Ever go to Fastenal, unless you need something Really Really Bad.

I am a business, I do need to buy in bulk!

And sadly, I did need them really really bad. Have some outdoor installations to do between now and Monday and with the holiday, no chance of ordering them today and getting them in time :(

[dan sherman]

I am a business, I do need to buy in bulk!

And sadly, I did need them really really bad. Have some outdoor installations to do between now and Monday and with the holiday, no chance of ordering them today and getting them in time :(

is 3 packs a typical order for you? If so they don't consider you a business, to them a business is someone that comes in and buys 50+ packs a week.

[Scott Shepherd]

is 3 packs a typical order for you? If so they don't consider you a business, to them a business is someone that comes in and buys 50+ packs a week.

No, it's not typical, they were stainless and we don't use a lot of stainless. But we are a valid business that buys hardware on a regular basis.

Last time I heard, it was illegal to post one price and charge another.

[dan sherman]

Last time I heard, it was illegal to post one price and charge another.

I think it's illegal to charge more, but not less.