When Your Trusted Provider is Fired

by John Elms, CEO

It’s Monday morning and you just received a notice from a manufacturer whose staff you likely have never met. The letter states that your trusted provider of products and services has been terminated as the manufacturer’s local representative. “Why would the manufacturer do such a thing?” you ask yourself before reaching out to your trusted provider for the details.

Could it be that my provider has not been delivering high quality service and support? That certainly has not been your experience.

Is my provider not paying the manufacturer’s bills? You have worked together for many years and that has never been evident.

Has the manufacturer appointed a new representative? Surely the notice you received would have stated as much if that was the case.

Rest assured that the reason manufacturers fire their resellers is because of one primary issue: the almighty dollar. Gross margins or top line revenues, it is all the same. Greed, purely and simply.

Manufacturers enter into agreements with resellers to leverage their local knowledge and relationships with the target buyers. The reseller’s staff is often in your facilities on a regular basis supplying many types of products and services. You know them, and they know you. Perhaps you see one another in the grocery store outside of work hours. Maybe you play on the same softball team or go to the same church or synagogue. Manufacturers build great products. Resellers build great relationships.

If your trusted provider has just been fired, maybe you should consider firing the manufacturer.

Customers sometimes attempt to buy directly from the manufacturer in the belief that they can enjoy the reseller’s margin in the form of a substantial discount by doing so.  Resellers that provide high-touch or “white glove” services are largely immune from this phenomenon.

More frequently, the manufacturer disintermediates the reseller to take the business direct and claw back the reseller’s discount to improve gross margins. It is a shortsighted strategy. At best, the manufacturer has forgotten why they established the reseller relationship in the first place. At worst, the manufacturer is perfuming their near-term financials to increase their income statement and balance sheet and the resulting value of the business.

I always make it a point to dine out with job candidates as part of the interview process. I do so to observe how they treat the wait staff. I have found that people who demean or treat wait staff dismissively because of the relative power positions in the serving transaction are the same individuals who abuse their power in the workplace.

Understand that a manufacturer assumes a certain power dynamic in their relationships with its resellers. Be certain, however, that the manufacturer who treats its loyal representatives poorly will do the same to you when it is in their financial best interest to do so. If your trusted provider has just been fired, maybe you should consider firing the manufacturer.