Sweat equity, the idea that hard work and time are sometimes worth money, is a familiar phrase to most cabinetmakers. That's why it's frustrating when someone comes in and undercuts your price after you put in the hard work closing the sale.
"You have to watch out for give-away artists," says Dave Chandler of Cabinet Supplier Inc. "They're just in it for the short term. They would rather buy their business instead of building it."
Give-away artists, people who undercut others prices to steal business, are a major complaint of distributors. "It's most annoying with labor-intensive products," Chandler says. "If we take two or three days to teach someone how to use a brass knob, and then someone comes in and undercuts us, then we lose the money we invested in getting the account, and also our time."
Kathy Constantine of Brown Wood Products Co. sees this as a symptom of a much larger problem. "All they're doing is opening the door to foreign markets," she says. "If we undercut each other 40 percent, China can come in and match that."
Constantine's worries are not unfounded. England's troubles with price undercutting led to all sorts of foreign markets taking over its business. It got so bad that the government began regulating the lumber industry. Consumers know that this is seldom a good thing. In the last few years England's taxes on lumber have skyrocketed. If U.S. lumber distributors continue to undercut each other, this could be their fate as well.
The immediate problem with price undercutting is that it's breeding an unstable market. The sale of domestic lumber fluctuated more than 20 million feet in the first months of 2007 alone. The unstable price of lumber hurts everyone, regardless of what type of profit margin you have.
Price undercutting is a constant threat to any business. However, most distributors are taking it in stride. "We could try and match their price, but we don't," Chandler says. "We tell them we're worth a little extra for better service. Sometimes we get the customer back."
Most companies aren't sweating price undercutting. "Most of the time you find that price isn't all that important to people," says Constantine. "[Distributors] should be pooling their knowledge so we can compete with the foreign markets."
Chandler echoes that sentiment. "There's a good amount of people out there who sell on merit," he says. "Most of us get along. It's just the select few who try to ruin it with price undercutting."
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