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

[WolfeMacleod]

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.

[nostatic]

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.

[Zeke]

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.

[MotoSook]

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.

[WolfeMacleod]

Originally Posted by Zeke

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.

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.

[72doug2,2S]

Originally Posted by MotoSook

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.

This ^^^ Corner and control the market.

[Zeke]

Originally Posted by WolfeMacleod

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.

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.

[WolfeMacleod]

Originally Posted by Zeke

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.

[Rick Lee]

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?

[stomachmonkey]

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.

[MotoSook]

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.

[WolfeMacleod]

Originally Posted by stomachmonkey

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.

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.

[id10t]

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

[john70t]

Originally Posted by MotoSook

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.

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.

[john70t]

Originally Posted by WolfeMacleod

About $7000/month is my break even point after rent, bills, supply stock.

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

[WolfeMacleod]

Originally Posted by john70t

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.

[GWN7]

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.......

[mnewport]

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.

[wdfifteen]

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.

[Rick Lee]

Originally Posted by mnewport

This is why I won't ever sell to Guitar Center--they pull these kinds of stunts with overstock.

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.