(This blog is inspired by feedback from my last series of blogs.)

In the last six months, we have seen a radical reformation of the retail shopping environment.  Twenty years after first going public, Amazon and online retailers appear to be demonstrating that they have won the war.  Note how many “bricks and mortar” chains are either going bankrupt or closing hundreds of stores.  Here is a short list:

  • Sears and Kmart – 150 stores and counting   
  • C. Penney – 138 stores
  • Macy’s – 68 stores
  • Bebe – all 180 stores – not clear if the brand has a future without stores
  • Guess – 60 stores
  • Crocs – 160 stores
  • Radioshack – 552 stores
  • Staples – 70 stores
  • CVS – 70 stores
  • Family Christian – 240 stores
  • The Limited – all 250 stores – not clear if the brand will continue
  • Wet Seal – bankrupt and closing all 171 stores
  • American Apparel – all remaining 110 stores – name sold off in bankruptcy auction
  • BCBG – 120 stores
  • Gander Mountain – bankrupt and new owner closing most of its 126 stores
  • Payless ShoeSource – filed for Chapter 11 bankruptcy and closing 400 of its stores

Total: 2,865 stores!

And that’s only a partial list of announced closings in the first five months of 2017!

American politicians have been fear-mongering about our country losing manufacturing jobs…just wait until they spin these facts and start trying to frighten us about the potential death of our service economy.  They won’t mention the higher tech jobs (and logistics jobs) that are being created by the online “winners” and the innovations that are coming to allow us to shop better on the web.  But in any case, there is significant displacement and a realignment of jobs resulting from these trends. This is not the focus of the current blog, however.

Back to the X-Ray dealer.

The truth is that many of the accessories our company has sold since I started in x-ray in 1981 have moved to internet sellers already.  These customers are now among our largest and we expect this trend to continue for this category of products.  What they are willing to sell will continue to expand.  I have predicted for some time that as prices for DR panels drop further, we will see these products sold in greater numbers online.  Why not?  What does it really take to install DR panels if you also have good YouTube videos and a highly responsive online help desk?  We know these products are headed rapidly for a sub $15,000 price, and can sub $10,000 be far off?  At $10,000, what would the margin have to be to justify a dealer making several onsite visits to sell, install and train?

“But we’ll make it up in volume,” some of my colleagues will say.  Exactly when has that worked out?

And as prices drop, the next concern will be “when will the manufacturers of these products start selling direct?”  Have you bought cables on Amazon Prime or eBay lately?  I have, and lots of other items.  It used to surprise me when my purchase arrived a few days later by US Post from China.  Now I expect this.

What are strategies for dealing with increased online sales of items that make sense?  Let’s call this the DR question.  These can include:

  • Do it yourself.
  • Develop a service side that adds value to the sale.
  • Use price warfare to make sure these competitors’ margins erode further.
  • Explore collective purchasing agreements to give you clout with the manufacturers.

Why don’t x-ray equipment manufacturers go direct with these products now?  They have tried to in the past.  When sales drop in the hospitals, the majors (like GE, Siemens, etc.) start elbowing into the “down market” where most independent  x-ray dealers work.  Even the smaller manufacturers have been known to reserve portions of market (either geographic or user types) for their direct salesforces or for elite dealers.

Mark my words, the manufacturers will try this again. There is nothing the x-ray dealer can do to stop them.  One of my dear dealer friends is convinced that there is currently an oversupply of manufacturing capacity.  If this is true, then basic economic principles tell us that the fight will get nasty to keep those factories working until either the market grows or some of the manufacturers fail.  The bosses will set targets and the sales groups will be given their marching orders to find revenue.  Eventually the order will be “by any means possible.”

I’ve had several mentors in my business life, and here are two the most important statements made to me:

  1. You make your money on the factory floor, not in the sales department. (That is, cost and quality control trump sales.)
  2. Sales are vanity, profits are sanity.

This is not to say that when times are tough you throw your sales staff out the window.  This is a common mistake made to reduce costs. It may mean resizing or reimagining your sales staff, but sales are not created by wishful thinking.

But I’m rambling…something you get to do in a blog…Back now to “by all means possible.”

I would argue that there is a very big difference been shipping a DR panel from China or Korea direct to an end user and selling an x-ray room direct, even if it is made in country.

The great news is that there is a lot involved in getting from the sales order to the ‘x-ray room in operation.’  And that’s where it is going to be very difficult to replace the local x-ray dealer.  Remember the cards you hold include your knowledge of your community and your reputation in it, the physical ability to get onsite quickly, your understanding of state and local regulations, and having parts and equipment for fast solutions when issues arise, as they always do.  And though you want and need access to new equipment, remember that you have another “vendor” of choice, your supply of good quality used equipment.  And this is a “vendor” you control.

So if and when the manufacturer becomes your competitor, embrace them.  Sure you should be willing to do their installs and do their service, but at a price that is profitable for you.  When you can, get that service contract payment up-front.  Do a good job because when the manufacturer figures out that they made a mistake in cutting you out of the initial sale, who will have the first option of taking their line?  In fact, from the beginning, make a deal that allows both of you to sell in your local area.  What the heck?  Let them give you a “free” salesperson.  And if you are pressured to accept lower install, service or warranty prices that are unprofitable, just remember that your refusal to accept them will either “allow” your local competitor to lose money or the manufacturer will have to set up a local direct alternative that you know will cost them much more.

Remember that as one road is temporarily blocked (I was going to say one door is closing, but I don’t believe that’s the right metaphor) another avenue will open (perhaps with another manufacturer), or you will finally have time to explore sales of other modalities.

Boy, did we have it good for so many years…those “analog” years of film and chemistry sales.  We made money without thinking about it.  It is a new world.  One that demands that we be thinking all the time, planning for the future before we really know what it will look like, and demanding that we try one or two new things to see what may be our business’ new direction.