Manufacturer Discounting
Due to the high number of responses I received on my “Selling 2010 Product” blog I thought I would take on another topic the Florida dealer sent me.
This dealer explained to me that manufacturer discounting has become more of a problem with the struggles of the current economy. He says that some manufacturers are discounting their stock inventory as much as 50 percent and despite the discount it is potentially hurting current inventory and used unit value.
The Florida dealer wants to know why manufacturers don’t offer a customer rebate like the auto industry. This would drive the customers to purchase what the dealer has in stock and then the dealer would reorder the product. He suggests that manufacturers give the customer a $5,000 or $10,000 discount and not the dealer so all dealers can compete on the same level.
To get a healthy discussion on this topic started, let’s hear what you think. Do you think by discounting too much, manufactures have created a game of ‘who can buy it the cheapest?’ Do you feel this process has created more of a negotiation when purchasing from the manufacturer? Are dealers holding off purchasing product to wait for a better deal?
*Editor’s Note* I would like to have a healthy, constructive discussion about this topic, so please refrain from commenting simply to “bash” manufacturers.
December 18th, 2008 at 3:50 pm
Discounting in the rv business is a problem. You always wonder if you got the biggest discount.We hold out waiting for a bigger discount. Often big dealers get better deals. I have considered cooping with several other small dealers, buying as a group to see if we could out discount the big guys. I have sold cars in the past, retail rebates are generally an advertising gimmick.You can advertise a rebate and get the same traffic.A rebate can be a dealer rebate.I agree take a deep breath (hold it for several years) and we will all be fine. Those that can hold on that long anyway.
December 18th, 2008 at 9:48 am
There is merit to both sides of this argument. While a customer stimulus would certainly be welcome, we must be careful not to create the monster the auto industry did.
Currently the biggest problem absent the equity loans that has been driving our business for the last several years, is the down payment and financing problems we are facing. It would appear that a “properly administered” customer rebate program could be instrumental in jump starting the finance process. Dealer discounts do nothing to help this situation and in fact only aggravate it. The banks will start looking very hard at our existing inventory when replacement inventory is being sold at a lower price. I can forsee a scenario where banks will summarily want to finance a smaller portion of the invoice amount as a result of the depreciating value of the collateral.
We are about to experience a flood of “repos” from various sources including banks and manufacturers which will have to be dealt with. Manufacturers will need to assist in ridding the market of these red headed step children before a normal course of business can resume. Customer rebates are certainly worth considering as a means of accomplishing this. I believe the key is “proper administration”.
December 18th, 2008 at 12:45 am
Very well said, Mike.
December 17th, 2008 at 4:22 pm
Pay attention ladies and gentlemen. Consumer rebates are the worst thing that could happen to us. Look at what it did to the Auto industry. Do you realize the average gross profit on a new car sale is less than $500 over invoice. Pretty soon the consumer is trained to wait for rebates and 0% financing before they will make a purchase. If manufactures want to help us, stay out of the consumer side of the business and keep all dealers regardless of size on the same playing level. If manufactures want to stimulate retail purchases they need to power down the negative media. People buy RV’s when they percieve they have the money to spend on them. With low housing equity and stock portfolio’s dwindling it will take a minute for the consumer to get mentally ready to make a major purchase. If dealers must, they should sell their inventory at a lower profit or a small loss to move it. The manufacturer could help with a sales spiff or dealer rebate. We need floorplan and warranty help more than anything to survive. Take a deep breath we will all be fine. Just leave ME run my business on level ground. If I fail shame on me. I won’t blame anyone but myself.
December 17th, 2008 at 1:16 pm
Yes i agree MFG’s should rebate the customer, like the Auto industry does, this would stimulate retail sales and move invenory off of lots.Also would not punish the dealer who is loaded with inventory and can’t buy any more to get a discount. We are a new compay and this discounting of RV ’s is currently hurting us as dealers expect us to do the same, and are wondering if we did discount are they getting as much as a larger dealer.It would be better to have customer rebates then everyone knows how much the rebate is and it would be the same for everyone.