Rant: I need to implement a new policy, and I don't like it.
 

Ugh. I haven't used Ebay in a long time, but now I have a really to really hate it.

At the beginning of 2010, one of my OEM users in England purchased a very large order from me for guitars he was building. Never heard from him again.

Over the last month, an unusual amount of orders has been cancelled. People backing out of orders outright, people asking for refunds and cancelling...about 95% of the normal sales have disappeared.

Turns out, the guy has been blowing them out of Ebay, basically, at cost! Apparently, his guitar line never got off the ground.
I can't complete with my own product, and he's saturating the market because what he's selling off is my bread and butter.
I can understand the need to sell stock he's got if he's in need of cash, but to saturate the market really screws me up pretty bad. I've asked him not to and explained what's happening here, but he sold more over the weekend and said "Let's look at the big picture"
Sorry dude, I AM looking at the big picture, and that's to keep myself in business.

A few years ago, a different builder did the same thing, and caused a ripple effect that lasted a year.


So now, I'm being forced to implement a policy for OEM buyers that restricts the direct competing against myself.

I don't like this one stinking bit.:mad:

Plenty of manufacturers have policies in place. For instance Bergantino cabs has a minimum selling price. Not just MAP, but *selling*. Any dealer caught selling for less is cut off. Of course with any of these it can be difficult if not impossible to police. Really the only recourse is to not sell them any more product. But if someone buys a bunch then starts selling, you can't really cut them off.

What Todd said especially since the guy has no intention of buying any more. Best thing is to get him to liquidate to you. I can see many advantages for him to accept. If you don't have the cash to do this, your business is on thin ice already.

Sorry to say that, but it's true.

If he's liquidating, there isn't a lot you can do. I understand your frustration, but he's already paid you for the product. You can buy them all back to control the market or change how you look at the large order you got from this guy a year ago. Perhaps a buy back policy will help in Tue future.

I've already asked him how much he wants for his remaining stock, since I need to take them off the market.
We do OK here. Not great, but OK. It keeps my bills paid, but I'm not becoming a millionaire. My best year of sales was $107k.

Still, it's more than I can make otherwise.

This ^^^ Corner and control the market.

So, what did he say? If you buy back the product he doesn't have to pay fees to eBay and PP. Plus he gets all his money back in a lump. Make him a deal he can't refuse.

Just as I thought, he's got 15 sets left according to the email I just received. That's about $4350 on the retail market for me, or about $2175 wholesale, which is what he would have paid.
He's already sold about 15 sets... if he takes another $4350 from me over the next month, that could break me if people keep abandoning their orders with me in favor of ebay. About $7000/month is my break even point after rent, bills, supply stock.

If he won't sell the bulk back to you, then there's something else going on here. Why wouldn't he sell them all in one transaction for what his net would be after eBay and PP fees? Wouldn't that be a lot less headache for him?

You need better contracts that cover markdown, returns, price protection, terms etc.... If a large buyer is looking to liquidate you can contractually obligate him to talk to you first.

If he's blowing them out at cost on ebay...what's the issue with you buying back what he has left onhand? Even if you sweeten the deal a little you still win.

I've started a policy document that all OEM users will need to agree to. I suppose I'll have to put in place some sort of MAP pricing policy for dealers as well.

Just remembered who the last guy that did something similar was. He blew stuff out well below cost.

Get some shill bidding accounts set up and raise the ebay prices?

Agree with the last posts....a business/numbers problem.
If he was selling "your" guitars with his name and in your area, it might violate his original sales agreement. Either way, his stock is temporary and you need to retain your long-term sales base.

Times are tight due to economic conditions, and people get more desperate these days.

That's a lot of crafted hand work for a small margin of profit.

The profit margin isn't too terrible. It costs me about $15 to build what I sell for about $130-150, and we can do in under 1/2 hour.. It's the OEM/Dealer sales that kill me in terms of profit margin.

Yeah, that's only 48 individual parts, give or take one or two. About a week and a half's worth of work.. maybe a week during a reasonably good week. Roughly 24 "working hours"

Still, that makes sure that ALL of the bills are paid and parts keep flowing.

You can implement any policy you want but in reality can you inforce your policy? Even if you got all your buyers to agree with your policys they are probably not inforceable in the areas the buyers reside. You would have to hire a barister and a solicitor that is licenced to practice law in the UK to try and stop him from selling your product at cost price. Even if it was worth it to try and inforce your policy all the person would have to say in court is I bought the product and payed for it. The business failed and I sold off my product to recoup my losses. The manufacture of the product made the minimun buy so high it was part of the reason the business failed. All that product has been sold and I won't do it again. All you would get out of it was a huge bill from the B & S.......

Wow, I'm very sorry to hear this. I also work in the music gear industry, albeit as a manufacturer and service provider. This is why I won't ever sell to Guitar Center--they pull these kinds of stunts with overstock.

Sorry to hear about it. If the buyer just overstocked himself and got in trouble I have some sympathy for him. But if he did this on purpose .. grrrr. Don't expect any help from eBay.

I get GC ads and coupons at least twice a week. However, there are a lot of major name manufacturers listed in the fine print as not participating. Seems the only stuff I ever want there is not participating in the coupons.

Be careful of a "restraint of trade" action.

Also, any non-compete clause can easily be subverted by use of a third party or two.

My suggestion: Never sell your named product like that. Your top line should be available only from you. Sell the OEMs your product, but restrict the use of your product names.

Great suggestion.

Bid them up.......

Your options:

1. Buy them back
2. Suck it up.

Then in the future enforce a Min Advertised Price. Common these days.

Not to be a booger but usually manufacturers manufacture, distributors distribute, and salesmen sell. If I was a retailer of your line of products I would want you to have something of your own to sell on your own and then allow the retailers to have their own merchandise. Can you somehow keep a line for yourself and then focus on making the rest of your money off the "other" stuff by selling to more distributors?

If he won't sell to you. Maybe he'd sell to me? I'll buy them and sell em back to you for a 15% cut. Yo.

i think you will have trouble enforcing any future contracts or at least, an expensive time doing so. i would avoid selling your exclusive product in bulk unless your dealing with a lucrative contract with fender, gibson etc...

i would accept this as a learning experience and figure out a way to pay the bills till you recover and think of all those pickups as positive marketing/advertising/product reviews...which hopefully will create more interest in the product...just like they do when people buy direct from you

theres a lot that can be learned by looking at how Rickenbacker sells or refuses to sell their parts and pickups

how about just sell retail? You may not sell as much product but you make all the profit.

Work less - make the same or close to the same or perhpas more?

Wolfe, any chance I can return my pups? I know it's been a year, but I found a smokin' deal on ebay!

It's a bummer this happened with a client(former) in England. I think it would be too costly at this point to go the legal route. I would hope he takes you up on an offer to buy the remaining pups back. That sucks.

He's not a distributor. I've never had this problem before with distributors or dealers, and there are agreements between dist/dealers and I that we don't under-cut each other.



Most of my sales are direct to the consumer, and about 15%-20% go to luthiers building guitars for clients. Moose Guitars was one such luthier.





Funny you said that. I'd rather eat my own testicles than deal with Henry at Gibson. Or John at Rickenbacher.
I may be producing about 40 P-90's soon for a line of guitars from G&L, destined for one of my local dealers

I think you should take the suggestion that your consumer line is branded as WolfeTone Pickups and anything you sell to a builder should be branded and packaged under a different name.

No you didn't understand what I was saying. Either you manufacture, you distribute or you sell. If you are going to manufacture and retail your own product then it can't be the same that you have others selling. The problem here is that you two have the same stuff. A couple small changes and a sticker will remedy most of this heartache.

i was not saying you should deal with either....why would john at rickenbacker deal with you anyway? they make their own pickups.

what i was saying is that unless i was selling very large batches to a major manufacturer on such a scale that i could support the business with that contract alone, i wouldnt sell in batches at all for the exact reason why you posted.

as for rickenbacker, the lesson to be learned is how they do not distribute their parts or pickups...you cant even get a truss rod cover unless you buy it from THEM...they are the exclusive dealer for their products and are able to protect their image, intellectual property and profit by doing so

as for G&L, i would say that is a big step up from Moose guitars or whoever the heck you sold a batch to. to be blunt, why would you even take a risk having your pickups associated with a company that may in the end, build a lousy product or be a here-today-gone-tomorrow company? for a quick buck? Or did you think Moose guitars was going to be the next PRS? Sure, your pickups already have a very fine reputation and probably the worst case scenario would be, yea i bought a Moose guitar and it sucked and they are out of business but the pickups were awsome...but why take that risk.....If Doug Irwin or Paul Languedoc asks you sell them a batch, thats a different story and worth the risk simply based on the name association

Most of the independent builders - short of Dimarzio and Seymour Duncan - both manufacture and sell, while also retaining brick and mortar stores and OEM customers who use thier product on guitars.
Most independent guitar builder also sell thier product, whiel also having some retailers as well.
Same goes for independent amplfier and pedal companies, and hardware manufacturers like Pigtail, Callaham, etc.

That's the way it works. Having my product on a top-of-the-line custom instruments is not only a selling point for the instrument itself, but a selling point for my own product. I made pickups for some of the top builders in the world.. people like Heatley Guitars
- Giffin Guitars - D'Pergo - Kortmann Guitars - Gene Baker (The Keebler Elf) and quite a few others.
Having my product on those guitars, if they are not identified as my product, becomes detrimental to the spreading of my own name as people no longer identify my product as being on high end guitars.

It's a symboitic relationship.

Fernandes Guitars in Japan handled all of my Asian distribution for several years, as well as having my stuff on thier top of the line guitars. They were fired as a customer in 2010 after trying to pull a fast one on me.

Having dealers also helps to aleviate some of my own headaches, as instead of dealing with 100 or more people a month, I may only have to deal with 75 if they can get them from a dealer. It gets to be quite exhausting sometimes.


Nevertheless, the saga continues. He's put more srtuff on ebay again, after saying that he wouldn't. He's still undermining and devaluing our name.

Is there a certified stamp or label on your (high-end) primary product?
That adheres your name to the big brands.

Every one of my products has a lable that bears our logo, brand name, and which model it is.
If it is somethign specifically designs for a particular luthier, it will bear our logo, brand name, and "Luthier-name Custom" as it's model designation.
Said Luthier requested our bread-and-butter models, so nothing was designed specifically for him.