You’re not crazy; delays, dynamics, disasters, and disruptions are making your life harder.
Dealers have been calling us lamenting about supply chain issues, but we realize that doesn’t give us the clearest picture of what our readers are experiencing.
We reached out to leading vendors directly (only three responded) and sent select dealers throughout the U.S. a survey via Constant Contact to get a clearer picture of supply chain challenges. We promised vendors we would not quote them directly because none wanted to go on record about the supply chain issues plaguing their companies The dealers also responded anonymously.
I’ll try to explain some things that may be relevant to your dealership.
First, a little info from the New York Times, Wall Street Journal, The Washington Post, and others:
- Everything you’ve read or heard about is part of the problem.
- Dealers and vendors alike see supply chain disruption running at least through the middle of 2022 or longer. Adapting and managing around it is crucial.
- The disruption applies to goods and the services that rely on those goods. This may be why your tech can’t repair a customer’s MFP and why your new Lexus won’t be in for another two months.
- Even if products were to pour forth at pre-pandemic levels, the distribution system, at least in the United States, appears to need both work and workers.
- Some parts of the supply chain will return to “normal” sooner than others, but it can be (cynically) argued that it is in the interest of all suppliers to limit production so they can charge more. What doesn’t get mentioned is that supply chain disruption is among the causes of inflation in the U.S. and western European economies. This is microeconomics 101: A key driver of inflation is high demand for products that are in short supply. Always follow the money. Cars are a great example: Used car prices are high because fewer new cars are available. According to the Times, the Journal and Kelley Blue Book, if you have a leased car about to be turned in, it can be advantageous to buy it at the pre-determined price stated on the lease agreement and sell it privately rather than turning the car in and starting a new lease. Talk with your accountant.
The Data
We asked dealers and vendors to state their level of agreement with several statements. We used similar questions to provide consistency across both groups. This broader perspective is helpful, and the reluctance of some vendors to participate in our informal study is at least interesting. Does this mean they are more concerned than they want to admit? That they don’t want to show any weakness? It’s hard to know, even though some vendors seem better at handling supply chain disruptions than others. Here’s what we learned:
- Supply Chain Impact
Nearly all dealers strongly agreed that supply chain disruptions were affecting their businesses and would continue to do so. Interestingly, dealer responses to other questions about the supply chain seem to indicate lesser levels of concern. Belts are being tightened, but life and business go on.
Vendors were asked a slightly different question that included what they were seeing with respect to sales volumes for dealers. Two vendors strongly agreed about supply chain impact, while the other disagreed. One vendor noted that while revenue and sales were lower year-over-year, orders were higher. As I noted, business goes on, with customers buying things they need. However, lower sales and revenue may be an indication of the deals being signed.
- Used MFPs, Part 1
We asked if dealers’ customers are inclined to buy or lease a used machine refurbished and warrantied by a vendor instead of buying/leasing a new machine. Dealers were equally split on this, although some reported their customers may be slightly more predisposed to buying a used device refurbished by an OEM.
- Used MFPs, Part 2
To get an idea of how much vendors’ efforts actually matter, we asked the same question for devices refurbished and warrantied by a dealer. It turns out that the local dealer wins by a slight margin. We can’t tell why, but it may indicate that end-customers place more trust in personal relationships with local dealers than in the makers of the machines. This is encouraging news for dealers!
Meanwhile, responding vendors disagreed that end-customers would prefer devices refurbished and warrantied by dealers.
However, neither finding indicates a stampede toward used machines. Only a quarter of end-customers expressing interest in used machines are expected to pull the trigger on used boxes. Vendors mostly agreed with this.
- Lease Extensions
You probably know this already, but most end-customers are willing to temporarily extend their equipment leases, keeping the machines they have until new ones are available. Vendors are also behind this, so you may be able to extend leases with a minimum of pain and frustration.
On the other hand, less than half of dealers said end-customers are interested in extending the lengths of future leases, with more than half claiming their customers are not interested in this option. Most vendors, though, were in favor of offering such flexibility. This may indicate that it could be worth having a renegotiation clause in lease agreements should external factors cause another supply shortage.
- Brand & Dealer Loyalty
We did not ask specifically about brand preferences, but respondents indicated they would be willing to shift to a different brand or make of MFP if their preferred devices are not available due to supply chain disruptions. Vendors generally agreed.
While providing a glimpse of brand loyalty, this is hardly definitive. Most machines on the market share similar capabilities and features, so the choice comes down to the dealer, not the device. So, we asked if dealers thought an end-customer would be willing to change dealers to obtain a different brand if the preferred one was not available. More than half said their customers would not jump ship and go to another dealer. Vendors agreed. But, given that half of the dealers said customers would go elsewhere may indicate there is work to do on the loyalty front. It can never hurt to solidify relations with all customers.
- Used vs. New
We asked if dealers’ customers are inclined to buy or lease a used machine refurbished and warrantied by a vendor instead
of buying/leasing a new machine. Dealers were equally split on this. Respondents indicated they would be willing to shift to a different brand or make of MFP if their preferred devices are not available due to supply chain disruptions.
- What’s Next?
We did not ask this because no one has a very good crystal ball. The combination of the pandemic and the delays, dynamics, disasters, and disruptions of the supply chain will continue until the “new normal” becomes business as usual.
During this transition, vendors said they are supporting dealers by allocating equipment based on critical, focused needs and being transparent about model availability. Vendors also say they are providing new sales and marketing tools, offering new document management capabilities, and greater security and opportunities in managed IT and managed voice. All support areas that can help customers grow.
The current climate may help dealers and vendors work more closely to provide the products and services end-customers need. And you can start. Begin by asking your customers how you could make their world a better place. Then, talk with your vendors to find how they can help you deliver for your customers.
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