As most of you would be aware there are certain appliance brands that operate on “pro-forma” basis. The idea is sound in theory – retail outlets promote their chosen “fixed price brand” to unsuspecting clients who pay RRP, but only to the actual supplier, not the retailer. The retailer takes the order, the cheque is made out to the supplier, the supplier delivers the goods, the retailer gets an agreed commission (fixed margin, no stock).
Sounds simple – but is it fair? Miele certainly thinks so. Miele UK’s chief executive Simon Grantham said: “Retailers are under increasing pressure from widespread discounting and struggle to make a decent margin on appliances. Through increased marketing activity to increase footfall in showrooms and promotions that help our partners to convert sales, this new system gives retailers a guaranteed margin on appliances. Miele UK will sell appliances to the consumer at RRP, implement all of the promotional incentives that encourage consumers to buy Miele appliances, so the retailers don’t have to, and then give the retailer commission on each sale.”
“We’re putting a lot behind the scheme because, from what we’ve seen of this policy elsewhere, its success really comes down to how hard we drive our marketing to build awareness of the brand. So that’s what we’re really committed to doing. I think we’re in a very good position to make this work.” According to Grantham, with this new strategy the contract will be between the manufacturer and the consumer, which means that Miele UK is able to set an RRP.
“What we can’t do, and what we’re not doing, is to tell our retail partners what price to sell appliances at,” explained Grantham. “Through our new retail strategy, what we’re doing is creating a contract between Miele and the consumer, which means we can sell at RRP.”
So Scotland becomes the latest retail battlefield to remove free enterprise and encourage what is often described as “gift wrapping”. A common practice that means the consumer buys $8,299.00 worth of pro-forma products, but receives a free sink and tap or similar. And if anyone tells you it doesn’t happen, think again. A recent discussion with some industry sales staff confirmed to TKBB it happens, especially when the consumer smells a rat and demands some form a discount or a particular salesperson wants the sale and “discounting” a fixed price product is the only option.
And as an aside – what’s to stop someone crossing into England and buying a discounted Miele product – Hadrian’s Wall isn’t still up is it?
I’m not a huge fan of pro forma – I can see why businesses invest in the programme, but shouldn’t selling be an art form, like designing? Isn’t negotiation part of selling – a huge part? Who was it who said “we are selling dreams, we are merchants of happiness”?
Let us know your thoughts on pro forma…..
