Diversion is a winning situation for some. For most of our industry, including distributors and salons, it is not. Understanding the diversion problem is the key to solving it. Manufacturer sells the distributor a product for $4 Distributor sells salons the product for $8 The salon retails the product for $16 Either diverting or going direct enables the manufacturer to sell the same product that is retail to larger retailers for $5, who then turnaround and sell it for $14 to the general public, with no middle man. Greater profits for all! By doing this the larger manufacturer can sell more products, achieve greater profits, and fuel the type of growth and sales that salons cannot give them. Who has more foot traffic, Salons, Costco, CVS, Walgreen's or Wal-Mart? Increasing profits creates higher stock value and shareholder interest for corporately held companies. Some telltale signs that a manufacturer’s line and the line that you are carrying are being diverted or going direct are
Diversion has a very direct and measurable effect on your retail business. You can certainly figure your annual sales loss in relation to last year and the year before. How much retail business did you lose last year? Do not answer without thinking about it! Have you ever received a complaint about your pricing of diverted retail product? If you have, that’s great! You now have the opportunity to satisfy that customer! It is a lot easier to keep an existing client, than it is to get a new one in today’s business environment. Silent complainers will never tell you their problem, but they will share their complaint with at least ten other people. There is even the possibility that they will never return to your salon! Today, many manufacturers are competing direct with salons for color business, as well as retail business in general. With some thought and calculations, try and quantify the full impact of manufacturer's product diversion on your retail and service profits. Your will find that your losses are greater then you can even imagine! Unfortunately, today’s manufacturers cannot afford to have their diversion stopped, because it accounts for a large portion of their gross sales. Manufacturers who try to educate the public about diversion in consumer magazines or on television are no better than the cigarette manufacturers, who try to advertise that smoking is bad for you. Their advertising is a smoke screen to cover the real problem. Plus, they have found a way to exhibit their business name and logo, too. Often at times, some of the larger product manufactures place unrealistic goals on distributors. In order to meet the manufacturer’s sales demands and prevent having the line taken away, some distributors are forced to become unscrupulous and divert product. Passing the blame of diversion to the small salon owner or unscrupulous distributor should be few and far between. Many reputable distributors are sharing the needless blame and are being made to support unrealistic purchases and contracted goals in order to keep there revenue. A few unscrupulous distributors cause diversion by trying to hold on their line. Most distributors are hard working, small-large businesses fighting many obstacles including economic down turns, extended weather related problems, and natural disasters and catastrophe. At present, diversion should be blamed directly on manufacturer’s back door shipments and unrealistic expectations. They have been fueling business away from salons for years. All of us at Dennis Bernard Inc. (DBI) meet and speak with stylists and salon owners from all over the country while working and attending trade shows. Salon professionals everywhere admit they are losing retail dollars from diversion; some feel that this has an effect on their service revenues as well. The answer to this dilemma for the salon owner, stylist, and distributors is crystal clear. Do not buy or sell product that is being diverted and found on shelves in mass quantities everywhere. Stylists and salons have done all the work building sales of these diverted brands, only to see our efforts end up on the wrong shelves and profits in the wrong pockets. The future of profitable retail sales is in your hands and worth noting. Search out new products when you go to trade shows! Support the companies who are supporting you! Pick up samples from vendors and try new products! Simple research into smaller companies who offer new lines can be the answer to replacing the diverted product line you now carry. Subscriptions to trade journals offer a wealth of knowledge on new lines for salon professionals. Internet sites dedicated to salon professionals offer even more information on the up and coming companies. DBI's commitment to advertising in professional trade publications and journals has proven our trust in stylists to give their clients the professional recommendation and education that mass marketers and drugstores lack. Knowing the proper application and use of DBI products is as important as the product itself! Brands take decades to become popular. Get behind a new line today, and make money for generations to come. DBI wants to partner with stylists in building a new brand. Salons that grow with DBI, a thirty year old family business, can rest assure that we will never forget that we are fueled by the professional's recommendation. Short term greed of diversion will never compromise the character of our company and our commitment to the salon professional and their profits. Diversion: The Answer Is You! |
