Un-authorized dealer
Lomalazuri
I recently wrote to a manufacturer and asked what the difference would be if I
purchased a piano from a retailer who was not listed under their "authorized"
dealer lists. They wrote me back and said that a sale through an un-authorized
dealer would be considered not a "new" piano and would therefore not be under
any warranty. I was really shocked to hear this. What does a retailer have to
do in order to become "authorized"? This seems so odd to me.
Roy Larrick
Not odd at all! Manufacturers have the right to control the distribution of
their products. An "authorized" dealer is one who is currently doing
business with a manufacturer by representing their product in their specific
market under an agreement put forth by that manufacturer. Dealers must
represent product lines within their proper territory, provide proper sales
and market share, provide proper service on the products and to the
customers, and pay their bills. Any dealership not doing these items runs
the risk of being "cancelled" by the manufacturer.
Why is this important? Because the size of the industry requires
independent dealers for the manufacturers to achieve their best market share
since no manufacturer is large enough to run their own distribution system,
although some have attemped. If you ever need service on that "new"
instrument, you'll need to utilize their service dept. But to answer your
question about "new" instruments, they are only sold to "authorized"
dealerships. Anyone else who is not an "authorized" dealer cannot purchase
a new instrument from that manufacturer. If someone else is representing an
instrument as "new" but not an authorized dealer, it probably is not!
Pianos are not like cars, they have no title, age year, or anything other
than the serial number to siginify its sales date. Regardless of brand,
purchase your instrument from an "authorized" dealer in your local area. To
be "authorized" the manufacturer already knows more about that dealer than
you ever will. They must be doing business with them for a reason!
Lomalazuri
Actually, I did find out that the retailer I have been considering IS indeed an
authorized retailer. I was a little surprised at first to think they would not
be (as they are a large store) but I am relieved to know they are.
I see your point though, I would not have tried to buy from an un-authorized
dealer.
Rick Clark
Based on my observations, there are a few factors in this "authorized"
business.
1. Territorial protection: Eliminating competition in a given
geographic territory holds down competitive pricing. Another
expression of this principal is that the agreement between the dealer
and manufacturer also often includes a stipulation that you can't
advertize the product's discount price on the internet.
2. Greater profit to the manufacturer: The overwhelming factor in
determining whether a dealer is "qualified" to be "authorized" is
usually the commitment to take a large number of units in a given time
span. Say, for instance, 200 pianos/year. There can be exceptions to
this, but most of the time, the dealer who can sell the most "wins"
the dealership. Another expression of *this* idea is that it may also
be stipulated that the dealer can not also carry a product which is
too closely in competition with the "authorized" product.
I know a dealer who is very ethical, but relatively small. He simply
cannot get most of the high-profile brands to sell in his store.
He did come to a preliminary, verbal agreement with one manufacturer
of very good pianos at a trade show but then the manufacturer decided
to jack up the number of units a dealer must take to "qualify", so the
deal is off.
As far as consumers go- sometimes I wonder if practices I have
observed with piano manufacturers (and other music industry products,
for that matter) might be possibly construed as illegal in an
anti-trust or anti-competitive light, but I am thinking the industry
just isn't high-profile enough for the feds to want to get involved.
They'd rather go after someone like Bill Gates. Of course, I'm no
legal expert- just wondering aloud. But it doesn't seem in principal
much different from some other cases the feds have pressed.
Rick Clark
Bob Snyder
Let's not make more of this than there is.
At the most basic level, an authorized dealer is one who is able to buy
directly from the manufacturer at wholesale prices. Thus he is
"authorized" to identify himself as an authorized (brand) dealer.
There's nothing anti-competitive about manufacturers having the right to
determine who represents them. The number and nature of the dealers any
manufacturer chooses to do business with is based upon a great number of
factors; certainly the potential business represented by a market is one
of those factors. But believe me, there is much, much more to it than
"who will sell the most". To sell more pianos at the expense of the
reputation of the brand name is an unacceptable situation, from many
companies' point of view.
Bob Snyder
CV...@my-dejanews.com
Rick Clark wrote:
>
> Based on my observations, there are a few factors in this "authorized"
> business.
>
> 2. Greater profit to the manufacturer (snip: required volume levels)
>
> As far as consumers go- sometimes I wonder if practices I have
> observed with piano manufacturers (and other music industry products,
> for that matter) might be possibly construed as illegal in an
> anti-trust or anti-competitive light, but I am thinking the industry
> just isn't high-profile enough for the feds to want to get involved.
> They'd rather go after someone like Bill Gates. Of course, I'm no
> legal expert- just wondering aloud. But it doesn't seem in principal
> much different from some other cases the feds have pressed.
>
> Rick Clark
>
Rick, I'm not an attorney, but I believe the applicable law is
Robinson-Patman. The distribution practices you describe are not illegal as
long as the manufacturer enforces them equally. What they offer one dealer
(volume discounts, for example) they must offer to all; what they impose on
one must be imposed on all. Another point is that R-P is generally not
"enforced" by the feds, it's used as the basis for a lawsuit by the aggrieved
party (probably a dealer). This (R-P) really has little to do with the
retail customer.
At least, that's what I remember from my B-Law class from 18 years past . . .
Regards,
Cork Van Den Handel
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Rick Clark
Cork,
Thanks for the info you have added.
To me, what makes some practices anti-competitive (if not in a legal
sense, then in a practical sense) is when the factory simply refuses
to sell product to any dealer in a territory other than an
"authorized" one. This is what keeps the retailer from having to
compete, price-wise. The idea of there being a law demanding the
dealers are treated equally seems moot when you *can't be* a dealer.
And, when the practice is as widespread as it is, it excludes the
little retailer from being able to compete at all, when it comes to
the most in-demand "quality names". If a store is not the "chosen
one" in a given territory, he's out of the game regarding those big
names.
I'm not saying such a thing *should* be illegal- it really depends on
what one's interpretation of a 'free market' and general economic
freedom are. It just seems to be awfully close to what other
industries do get busted for, (whatever the actual laws are) so it
makes me wonder. I'm still having a hard time grasping what it is Bill
Gates has done so 'wrong' in a free market economy other than having
made himself a big, fat target to the government.
And I think it's a darn shame the kind of disadvantages "Ma & Pa"
stores have in this type of business climate. The tendencies toward
their eventual extinction seem clear.
Rick
Bob Snyder
Rick Clark wrote:
> To me, what makes some practices anti-competitive (if not in a legal
> sense, then in a practical sense) is when the factory simply refuses
> to sell product to any dealer in a territory other than an
> "authorized" one. This is what keeps the retailer from having to
> compete, price-wise.
Rick -
Are you suggesting that manufacturers should be forced to sell their
instruments at wholesale to any dealer who asks?
Kathy Tenorio
Seems that, at least in the case of dealers in my area, an authorized dealer
must be picked based more on integrity than sales volume.
We only have one in the immediate area, and he is a small store, selling for
what would be considered very competitive prices. He doesn't haggle, just gives
a fair price.
There was another authorized dealer about 1.5 hours away, who was a much larger
producer (if that is what counted). He started selling Yamahas out of his other
store in the same territory as the one I purchased from. He lost his
dealership. If it was based on volume, he would have been the one to win out
over the smaller dealer.
I am glad to see that there is some fairness in this area.
Kathy
from the beautiful Pocono Mountains
********************************************************************************
******
Finally, brethren, whatsoever things are true, whatsoever things are honest,
whatsoever things are just, whatsoever things are pure, whatsoever things
are lovely, whatsoever things are of good report; if there be any virtue, and
if there be any praise, think on these things. (Phil. 4:8)
Rick Clark wrote in message <357d9fda...@news.mindspring.com>...
>Cork,
>
>Thanks for the info you have added.
>
>To me, what makes some practices anti-competitive (if not in a legal
>sense, then in a practical sense) is when the factory simply refuses
>to sell product to any dealer in a territory other than an
>"authorized" one. This is what keeps the retailer from having to
Rick Clark
Bob Snyder <rjsn...@ix.netcom.com> wrote:
>Are you suggesting that manufacturers should be forced to sell their
>instruments at wholesale to any dealer who asks?
No, and I think I quite clearly stated that the "shoulds" are a
separate issue. I am simply stating observation. I usually choose the
side of more economic freedoms and less government interference.
"Force" is an issue of government control. But I do think the practice
ipso facto limits competition. Why pretend otherwise? Are you
suggesting granting "authorized dealerships" does *not* create a
situation in which there is less price competition? And if the main
motivation has to do with how products are represented, why do
manufacturers grant "authorization" based on territory?
Rick Clark
"Kathy Tenorio" <jkt...@ptd.net> wrote:
>There was another authorized dealer about 1.5 hours away, who was a much larger
>producer (if that is what counted). He started selling Yamahas out of his other
>store in the same territory as the one I purchased from. He lost his
>dealership. If it was based on volume, he would have been the one to win out
>over the smaller dealer.
Right, Kathy, but this proves my point that they are eliminating
competition in a given territory by granting "authorization". The
other dealer overstepped his territory and tried to compete.
Dealer performance expectations are going to vary with the
populations/demographics they serve. Every dealer can't be the
biggest.
I think the 'fairness' you mention is true: it was fair for Yamaha to
uphold it's agreement with the local dealer and stop the practices of
the territorial infringer.
Rick
Kathy Tenorio
Rick,
While it would seem obvious that this practice would eliminate competition, it
really was in the best interest of the consumer. The dealer infringing on the
other's territory was selling his pianos for considerably more than the dealer I
purchased from. This had nothing to do with my decision, since he had already
lost his dealership before I purchased my piano.
It seems to me that although the dealer I purchased from has little local
competition, he is still aware of his potential customers ability to go out of
area (within 1-1.5 hrs.) and that seems to keep him competitive. BTW, this
dealer is about 50 miniutes from my home and is the closest dealer around.
Kathy
from the beautiful Pocono Mountains
********************************************************************************
******
Finally, brethren, whatsoever things are true, whatsoever things are honest,
whatsoever things are just, whatsoever things are pure, whatsoever things
are lovely, whatsoever things are of good report; if there be any virtue, and
if there be any praise, think on these things. (Phil. 4:8)
Rick Clark wrote in message <357dd8b7...@news.mindspring.com>...
CV...@my-dejanews.com
Rick Clark wrote (with some editing):
>
> To me, what makes some practices anti-competitive (if not in a legal
> sense, then in a practical sense) is when the factory simply refuses
> to sell product to any dealer in a territory other than an
> "authorized" one. This is what keeps the retailer from having to
> compete, price-wise.
Putting aside my personal views, I'll present the opposite side. Exclusive
territories for a brand such as S&S are intended to provide dealers with the
opportunity to make a profit while still providing excellent service,
maintaining a high standard for S&S. After all, the dealer is the primary
customer contact for S&S. The presence of two or three S&S dealerships in,
for example, Dallas would "inevitably" result in price competition and a
concomitant reduction in either service or dealer profitability. S&S would
likely find either of these outcomes unacceptable because it's business model
is built on the perception of quality rather than high volume. (In fact, S&S
PROBABLY does not want to see any discounts given on its pianos; to some
extent the high price increases it's "value" to much of its target market. I
believe economists might even classify it as a "Giffen" good, one for which
sales volume increases as price increases.)
> And, when the practice is as widespread as it is, it excludes the
> little retailer from being able to compete at all, when it comes to
> the most in-demand "quality names". If a store is not the "chosen
> one" in a given territory, he's out of the game regarding those big
> names.
>
> I'm not saying such a thing *should* be illegal- it really depends on
> what one's interpretation of a 'free market' and general economic
> freedom are.
Essentially, the U.S. definition of a 'free market' in this case is that the
manufacturer is free to sell to (or through) whomsoever they please as long
as they stay within the bounds of Robinson-Patman. They can sell direct,
they can go through distributors or dealers, they can even choose to not sell
to anyone and go out of business.
>
> And I think it's a darn shame the kind of disadvantages "Ma & Pa"
> stores have in this type of business climate. The tendencies toward
> their eventual extinction seem clear.
>
> Rick
>
I think you may be correct, because of the limited number of high-quality
brands available. There are only M&H, S&S, perhaps Charles Walter as he
expands his line of grands; Fazioli, Boesendorfer and the handful of low
production German manufacturers are generally priced too high to compete.
The midrange pianos from Japan and Germany expect high volume, closing out
the small dealer.
As I've studied the domestic piano market from a business perspective I've
concluded the current fragmented dealership network is at risk. I would not
be surprised to see these little local dealerships "rolled-up" by two or
three national firms similar to what has happened in office supply or other
areas, or what's happening now with auto dealerships. Then there will be
even less opportunity for the "Ma & Pa" shops.
I ramble. Please excuse the length . . .
Bob Snyder
Rick Clark wrote:
> Bob Snyder <rjsn...@ix.netcom.com> wrote:
>
> >Are you suggesting that manufacturers should be forced to sell their
> >instruments at wholesale to any dealer who asks?
>
> No, and I think I quite clearly stated that the "shoulds" are a
> separate issue. I am simply stating observation. I usually choose the
> side of more economic freedoms and less government interference.
You and I will certainly agree on that point! If you want to see what
happens when the government starts setting up all sorts of rules related
to manufacturers and dealers - - go to Germany.
> "Force" is an issue of government control. But I do think the practice
> ipso facto limits competition. Why pretend otherwise? Are you
> suggesting granting "authorized dealerships" does *not* create a
> situation in which there is less price competition? And if the main
> motivation has to do with how products are represented, why do
> manufacturers grant "authorization" based on territory?
I can't speak for other manufacturers... but in our case (and I believe
many others) a dealer for a piano which requires a very high level of
service... there is a limit to the amount of territory within which that
dealer can provide the level of service we want to see. With any product,
the ability to provide a high level of service can only exist if there is
enough profit to allow it. Once that erodes, the service likewise
erodes. Also... once the opportunity for a dealer to be profitable with a
line disappears.... the dealer no longer needs or wants that line... no
matter how good the product is. When that happens... the manufacturer is
in serious trouble. We can all think of a few brands which are
excellent... but which have all but disappeared. That's not good for any
of us.
Bob Snyder
pTooner
Bob Snyder wrote:
> Rick Clark wrote:
>
> > To me, what makes some practices anti-competitive (if not in a legal
> > sense, then in a practical sense) is when the factory simply refuses
> > to sell product to any dealer in a territory other than an
> > "authorized" one. This is what keeps the retailer from having to
> > compete, price-wise.
>
> Rick -
> Are you suggesting that manufacturers should be forced to sell their
> instruments at wholesale to any dealer who asks?
I've never given this much thought before, but why not? I formerly owned
a small retail store and could not get the really desireable brands. I
didn't give it much thought at the time, but in retrospect it doesn't seem
reasonable. That is especially true of the geographic protection thing.
Gerry
--
When confronted by a difficult problem you can solve it more easily by
reducing it to the question, "How would the Lone Ranger handle this?"
****Piano Tuners are Grand and Upright People****