Listen to Jason Bader of the Distribution Talk Podcast and Dave Roller Discuss Pricing Non-Stock Sales.
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Jason Bader: One of the other areas that you had touched on in that article was non-stock items being priced too low. And this is this is one I couldn’t agree with you more I mean, I think so tell us a little bit about that. What you’ve seen out there.
Dave Roller: Oh, it’s so painful to watch, you know, it really is. If you take and compare most distributors non-stock margin, it’s within five points plus or minus their stock margin.
Jason Bader: Absolutely. That’s exactly what I found, minus, and it kills me, it kills me.
Dave Roller: And then you say, well, maybe it’s so low because these are very big orders. These are big items. Then you start going down to the really low-level stuff, where it’s a real non-stock purchase. They’re not going to buy the item again. They didn’t spend much money when they did. Your guy or gal went out and researched it, did the work necessary, spent all your money sourcing and pricing and then you give it away at your average margin?
Jason Bader: Yeah, or less. Yeah, that’s it. I’m gonna put I’m gonna put 20 on it or I’m gonna put it in nobody knows how to price beyond the fives, you know? 20, 25, 30 I mean, just, yeah, kills me.
Dave Roller: I think there’s a role for the salesperson being very much involved on a non-stock when it isn’t an incidental sale or it’s a big order. They have the knowledge. However, for them to be rolling over an automatic margin on an incidental non-stock sale is just money tossed away. And you don’t have to do that. You can use your ERP system to price these incidental non-stocks much the way you do your stock.
Jason Bader: Huh, okay. Because, you know, honestly, I remember clients specifically- that their non-stock margin was 6% less than the stocking margin. And this represented at least…I want to say 35% of their sales. So I’m thinking oh, guys, and I think you know, again, my mind always says, hey, look, just the things that you were mentioning, you researched it, you had to go outside of your easy button to go and procure this, we should make more than our normal stock margin on this. I mean, it just logically that makes sense. But boy in this company, it just didn’t, and we spent an awful lot of time trying to unravel that thinking it was really just thinking it was between the ears was nothing to do with the software. It was all- you know, people just didn’t understand that, you know, hey, where are you spending more time on this.
Dave Roller: Well, it is cultural. And I’ve had clients basically say we look at non-stocks as a service we do to our customer. And yes, it is. It’s a tremendous service they’re providing, but they should at least be reimbursed for some of their costs to perform that service.
Jason Bader: At least make what your stock is, you know, my preference is that you’re 6% higher than your normal average stock, you know, margins.