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« The Market Reacts | Main | I Will Single Handedly Fight This »
Thursday
Oct182012

More Dialogue

Since we're talking about rising whisky prices, I've written a new, three-part dialogue for your perusal.  The last piece I wrote that included typed conversation seems to have gone over well, so I'm adding a follow-up here to help illustrate more important issues facing the whisky industry right now.

The first part is titled: In the spirits section at K&L

David is seen stocking the shelves, a customer enters from stage left

David: Hello sir.  Welcome to K&L. Let me know if I can help you find anything.

Customer: Actually, I'm looking for a bottle of ______.  Can you tell me where it is?

David: Certainly, it's right over there on the left, second from the end, on the bottom shelf.

Customer: Wow. $52.99?  I can get this at MevBo for $42. 

David: Unfortunately the price has gone up recently, so we had to raise our price as a result.

Customer: So you can't match MevBo's?

David: Normally, if it's just a matter of different pricing, I'd be happy to.  In this case, however, $42 is less than my wholesale cost.  MevBo is offering that price because they haven't bought in since the increase in cost.  It's not only that their price is lower than ours, it's that their current wholesale cost reflects a purchase from many months ago when they bought volume at the old price. While I can't match their price, I'd be happy to call the MevBo down the street, however, and have them hold you a bottle.

Customer: I'd rather buy it from you.  Can't you just match the price?

David: Well, if I do that I'm actually losing money.  It's one thing to make less profit, which I am happy to do in the name of customer service, but I can't actually lose money on each sale.  I can offer you a discount, but I can't match that price. You see, when liquor companies raise their prices there are some stores that still have inventory with a retail tag that reflects the old wholesale price.  We move through our inventory faster, so we have to change our prices first.  Unfortunately, in times of transition like this, that means we have to be the store with the higher sticker.

Customer: So MevBo has better deals than you, huh?

David: In this case, yes.  It just so happens that they haven't had to repurchase the item at the new wholesale cost.  Eventually, they'll have to raise their price as well.  All of these whisky companies are raising their prices right now and it's really a pain.  My margins keep getting thinner because I want to keep my prices consistent and avoid situations like this.

Customer: Wow, what a bummer.  I guess I'll have to go to MevBo. 

David: I'm sorry about that, really.  It's not us raising the price.  We're simply reacting to the increase ourselves.

Customer: I don't understand anything you just said.  All I know is that MevBo has better prices than you.  I'll just go there first next time.

End scene

Wow, that was intense!  I was wondering what was going to happen the entire time!  Was David going to lower his prices and take the hit?  Was the customer going to be sympathetic to the changes of the market?  Riveting stuff!

OK - now for the second part, titled: What the F?!

A retail store manager is seen sitting at his desk. He is talking on the phone to a brand manager, whose voice we can hear through a speaker.

Manager: Listen, all I know is that I've had customers calling all day, wondering if we'll price match the ______ whisky with K&L.  I can't match that price!  What the F is going on?  Did you guys cut them some kind of a deal?

Brand Manager: Not that I know of! They must be choosing to make less money per unit and move volume instead.

Manager: This is total bullshit.  There's no way that any retailer can sell the ________ for $77.99 and make any money.  That's practically what that whisky costs wholesale!  I can't even pay my electric bill with $1 per bottle profit margins! You must have cut them a backdoor deal and now you're just trying to cover your ass!

Brand Manager: I promise you, we didn't! They paid the exact same price as you did!

Manager: Well I'm not matching that price, but if K&L has it for $77.99, then just how the F am I supposed to sell it for $100!  Everyone will think that I'm overcharging them when in reality they're just offering ridiculous pricing.  I'm just going to close it out and get rid of it.  I can't compete on this anymore.

Brand Manager: Let me see what I can find out.  I really don't want you to have to stop carrying the product.  Just give me few days to see what's going on. 

End scene.

Jeez.  This is a really intense story so far.  I wonder what's going to happen next!  Let's find out in part three, called: Now You Know How I Feel

David is shown sitting at his desk, eating a sandwich when the phone rings. He picks up and we hear the brand manager greet him through the speaker.

David: Hi, this is David.

Brand Manager: David, it's Larry over at _________.  How's it goin'?

David: Hi Larry, it's going fine.  What's up?

Brand Manager: Well.....not so good.  We've got a problem and it pertains to your price for _______.  You're selling that for $77.99 and that's a little lower than we're comfortable with.  We've been getting complaints from other stores all day and they're threating to drop the product if you don't change your price.

David: Wow, that's a problem.  You know what else is a problem?  My price for _______.  I'm at $52.99 but other stores are still offering that product for $42.  People think I'm overcharging them for the bottle because there are still a bunch of stores nationwide with the old price.  I've been getting complaints all day as well.

Brand Manager: David, you know that we raised the price for everyone, not just you. 

David: That's true, Larry.  However, I'm still a smaller retailer who can't afford to buy in before the increase like other huge chains can do.  While they're still sitting on older inventory with hundreds of cases, I'm moving through my inventory faster and I'm forced to raise my prices first.  The problem is that customers don't understand this, so they think I'm just charging them more.

Brand Manager: But eventually, the other stores will sell through and raise their prices as well.

David: True, but with so many increases happening across the board, there are always going to be whiskies that I simply am not competitive with because someone, somewhere, will have a deeper inventory than me.  We're getting national attention now and I have to be able to compete with Chicago and New York, too.  But that's OK because I've figured out a way to balance that all out.

Brand Manager: What's that?

David: For every product that goes up in price, I'll pick a product from the same company and lower it.

Brand Manager: How is that going to even out your profits?

David: Oh, I didn't mean financially.  I meant it would even out the amount of complaints we would both have to hear.  You see, producers never take any flack from customers.  The retailers do. But now, for every complaint about price increases I hear from customers, you'll have to hear a complaint from another retailer.  So we'll be even!  What do ya say?

Brand Manager: I think you've lost your mind.  This is the craziest thing I've ever heard.

David: Maybe to you it is.  However, my customers are sick of the same whisky they bought last week costing ten dollars more this week.  It's frustrating, so I'm going to stick up for them and offer some relief. 

Brand Manager: I understand your frustration, but isn't there anything else we can work out?

David: Sure.  The next time you lower the price on a product, I'll respond by raising the price on one of mine.  Like the ______ whisky that's causing so much trouble right now.  Just lower the price on something and I'll bring it back up again.  That way we'll always have balance.  Balance is important.  So is regularity.  If you eat a balanced diet it helps to keep you regular.

Brand Manager: I think you need to take a break, David. You sound like you're losing it.

David: Nice talking to you, Larry!

End Scene.

Wow!  What's going to happen now?  Stay tuned for more exciting dialogues to find out!

-David Driscoll