Why would Serotta drop a dealer?

[BumbleBeeDave]

In a previous thread, vs779 wanted to order a Serotta from his dealer, only to be told by the dealer he had just received a letter stating he was being dropped because he did not sell enough frames annually.

First, I am wondering just how many frames annually is “enough.”

Second, I am wondering why Serotta would drop a dealer, even if the dealer only sells a few frames per year--especially if the dealer is in an area where there are no other competing Serotta dealers.

What exactly does Serotta invest in a dealer that would require the dealer to sell a certain number of frames per year for Ben to make an accceptable profit? Doesn’t the dealer purchase the size cycle and pay for the fitting technican training? What exactly does it cost Ben in terms of dollars or reputation to have a dealer who is not “producing” up to quota? Does he supply anything to the dealer other than catalogs or other promotional materials?

Is this policy intended to subtly pressure dealers to push Serottas over other brands they might also carry? Do other companies do the same thing? And wouldn’t this kind of policy end up unconsciously pressuring LBS employees to sell the bikes they “need” to sell--in this case Serottas--rather than what they may truly consider the “right” bike for the individual customer?

I’m sure there is a reasonable business-related justification for this policy--Ben is obviously no dummy. I’m just curious as to what it is. :confused:

BBDave

[Kevin]

While the dealer is telling the public that it was dropped for not selling enough Serottas, the real reason may be quite different. As BBDave points out, the economics do not call for the dropping of a small volume shop. It is more likely that Serotta would drop a shop for service or quality concerns. It may also be that the individual at the shop who was certified by Serotta has moved on to another shop or career.

Kevin

[Jay Torborg]

It is also possible that another, perhaps more successful, shop in the area has expressed an interest in being a dealer, but is not willing to do so with a local competitor, or perhaps it is Serotta's policy to only have one shop in each area to prevent direct price competition.

But I don't agree that it costs Serotta no money to maintain a dealership. There is ongoing training, periodic contact with the dealer, sales meetings, brochures and other advertising media, etc. that Serotta must pay for independent of how many frames the dealer sells. If a dealer is not productive, it could easily be in Serotta's best interest to drop the dealer, and perhaps have no local representation, until a more lucrative opportunity arises. In many cases, a prospective Serotta customer will seek out a dealer further away and Serotta would not lose the sale anyway. Since this dealer was not selling many frames, Serotta probably feels that they will lose little business by dropping them.

[M_A_Martin]

Lets say that supporting a distributor costs exactly the same amount regardless of how much product a distributor sells.
Given that it costs X amount for a business to support distributors, it is beneficial periodically for the business to get rid of the bottom 10% or so of distributors and concentrate resources on creating new opportunities (new distributors) or supporting the top 90% of distributors.

I forget which theory that is...but its a pretty common way to do business.

And, if product has been sitting around for a while, or the amount sold isn't increasing from year to year at a particular distributor, perhaps the distributor doesn't feel the need to mention the product when selling to a customer and the product that is sold is sold to people who are actively looking for that product. Those customers who purchased from that distributor hunted the product down and will travel to get the product if necessary. If the product just sits there and doesn't move out the door with the customer, the brand may develop a stigma in the region. The distributor meanwhile is costing the same X as a distributor who is actively selling the product. The lax distributer benefits by being able to say they carry premium product, but without the sales to provide a return on the companies resource investment.

I'm not saying that it doesn't suck in certain ways, but if Serotta is going to grow as a company they need to direct their existing resources to the places that will do them the most good.

[BumbleBeeDave]

. . . for the feedback. I am not a biz school grad, but I can see a lot more logic in the practice now!

BBDave

[Jollymon]

According to my Serotta dealer, they drop the bottom performers every year. There was another one in ATL that was dropped a few years ago. Boutique or not, these guys have to perform or Serotta is going to allocate its resources elsewhere.