A question that often gets asked is “Where should I buy my office equipment? From a dealer or the OEM (original equipment manufacturer)?” In this article, I have attempted to address some things that you may consider when making your decision of who will be your vendor.
Both manufacturers and dealers sell office equipment direct to customers and have established bases of customers. So how do they differ?
What Do Dealers and Manufacturers Want to Sell?
One of the best ways to illustrate how the interests of office equipment dealers and manufacturers can differ is by looking at each business’ scope and intent. While both ultimately want to generate a profit, their scope and intent vary.
Office equipment manufacturers design, build, distribute, and sell products and services to meet the needs of large and often global markets. Manufactures want to increase their market share by selling more of their specific brand of equipment.
As a result, you will find that the sales representatives for the manufacturer will primarily focus on the specific features of the equipment and will want to schedule a demo to show you those features.
Office equipment dealers don’t design, build or distribute equipment. While dealers often align with one or two equipment brands, they have more flexibility to offer products and services from other manufacturers that are tailored toward their local market.
Dealers also want to increase their market share, but they achieve this using multiple brands of equipment and associated services that designed with the needs of the local market in mind.
Dealer sales representatives will also talk about equipment but are also trained to spend more time talking about solutions to specific customer needs that could add value.
Who Has the Best Price, Manufacturers or Dealers?
Intuitively it may seem to make sense that the manufacturer would always be able to offer the best price for their office equipment and services. After all, if you deal directly with the manufacturer, you are cutting out the middleman (i.e. the dealer)?
However, this is not the case. While manufacturers distribute their products and services through dealers and also sell directly to customers through their direct branch operations, the wholesale price that they charge their dealers and their direct branch operations are often precisely the same.
The dealer or the direct branch mark up the wholesale price and sells it to their customers. Why is this? Like dealers, manufacturers require reasonable profit margins to support their branch operations.
Manufacturers usually have more layers to their operations than dealers (for instance manufacturing and wholesale), but to survive and prosper they cannot afford to cut their margins at any level on a consistent basis.
So, while you may find that sometimes there is a difference in price for a similar product offered by the manufacturer direct vs a dealer, it is the result of a local decision and not because of consistent competitive advantage.
Is There More Risk Dealing with a Manufacturer or a Dealer?
Risk is a crucial consideration that influences most buying decisions. When choosing a vendor, these are all essential considerations:
- Are they financially stable?
- What is the scope and quality of the products and services they offer?
- Will they be easy to do business with?
- Will they provide value to my operation?
Most manufacturers are publicly traded global businesses, so it is easy to do a web search and find out information about their financial performance, products and other relevant information.
While it may seem that large global manufacturers are more financially stable than dealers, this is not necessarily the case.
A manufacturer’s financial results are impacted by the global economy which can have either a positive and negative impact on their operations. While the economy may be strong where you reside, the manufacturer’s commitment to your market can change based on their results or influences in some other part of the world.
Changes in technology can also significantly impact the manufacturer’s success and commitment to the market. The failure of Kodak Corp provides an excellent example.
Most dealers are privately owned, and their financial results are impacted only by their success in the local markets they serve. Dealers have the flexibility to represent more than one manufacturer’s products and therefore can tailor their offering to their local markets.
This provides dealers with an advantage as they are not dependent on the success of one manufacturer which reduces the global risk described above. Dealers also can adjust more quickly to changing market trends.
How can you assess if the dealer is successful?
In today’s market, successful dealers often are larger and have broader geographical coverage. The size of the dealership is an indicator that the dealer can adequately support changing technologies and a more comprehensive suite of offerings.
While both small and large dealers have access to manufacturer support lines, dealers that have large installed bases of equipment with many service technicians have a wealth of internal experience to call upon when resolving a technical problem.
They also have backup coverage for vacations, sick days and other everyday situations that can impact a dealer’s ability to service vs a smaller dealer. Other indicators of success are how long the dealer has been in business, the size of their equipment base and the customers they service.
A dealership that has been in business for many years, has a large installed base of equipment and a track record of servicing both large regional companies and smaller local ones, is probably financially stable.
Larger dealers have usually invested in infrastructure that automates functions such as invoicing, meter reads, placing service calls and ordering products which enables them to service a broader range of accounts effectively.
Do they ever sell a “lemon”?
The top manufacturers of office equipment make quality products that perform well in the market. If not, they would falter quickly and go out of business.
Even the top manufacturers from time to time may introduce a new model that may not be as strong as some of their other models. While it doesn’t happen often, all manufacturers are subject to this problem.
Dealers aren’t immune to this problem when it occurs, but they do have more flexibility to address the issue.
The manufacturer may still have to market the “weak” product even after they discover the problem given that they have a manufacturing commitment or inventory levels to address. The dealer can stop selling the product immediately once the problem is identified and offer customers an alternative product.
Get to know the people
The people you deal with directly at either the manufacturer’s branch or the dealership can make a huge difference in your experience.
- Do you get to know the people you are dealing with?
- What access do you have to senior management should you have a problem?
- Is there continuity with the people or is their regular change?
The dealer will generally offer more continuity regarding the people and better access should you have a problem. After all, most dealerships have owners who are active in their business and can be contacted should you have an issue that you don’t feel they are addressing adequately.
The same is not necessarily true when dealing with a manufacturer given the bureaucracy that is inherent in most large organizations.
Who Provides Better Service, the Manufacturer or Dealers?
Both manufacturers and dealers provide service to support their sales of office equipment, and there are customers of both who are satisfied with the service levels they receive. There are some things to consider though when choosing a service provider.
The impact of centralized service dispatch and administration
Manufacturers with direct operations cover large geographic areas (i.e. Canada). As a result, they locate their service and administration systems in a centralized location (such as Toronto).
This can be beneficial to a large enterprise account operating across the country and requiring centralized billing and reporting.
Dealers have their own service and administration systems located in the area that they service.
For regional and local businesses this can be more beneficial given that the people who perform the tasks in those systems get to know their customers and have a better understanding of specific customer’s needs. Also, if an issue arises such as a problem with an invoice since the dealers have less bureaucracy to deal with they can address the issue more quickly.
The impact of service offerings
It is essential to assess the service offerings by both the manufacturer and dealers before you choose your vendor. Some considerations are:
- Does a manufacturer’s warranty cover the equipment? If so, what is included? A warranty sounds great, but it may be inconvenient, especially if you need to send the equipment back to the manufacturer for service or replacement.
- Does the manufacturer or dealer provide on-site service or is it depot service? Depot service means that you have to bring in your piece of office equipment to a depot for servicing should there be a problem. This can be extremely inconvenient as it takes time, money and is disruptive as you will be without your office equipment for a period.
- Does the manufacturer or dealer provide their own service with their own service technicians or is their service subcontracted to a third party? If the service is sub-contracted, there may be less control over the service levels provided.
- If the manufacturer or dealer directly employs their service technicians, how many do they have and where are they located? This will help you determine their coverage capability to service your account.
- What is the training and experience of the service technicians employed? What support is in place to assist their service technicians? Both also have access to the manufacturer’s service support lines and field representatives to help when required.
- How do the manufacturer and dealer measure their service performance? Every dealer and manufacturer in will say that they offer the best service, but how do they support their claim?
How can you evaluate service performance as determined by customers?
The relevant question is to ask how they know they provide excellent service and what objective measures they use to support their claim.
You can ask for customer references, but if the prospective vendor provides them, they all should provide glowing references. If the references aren’t glowing, you should disqualify that service provider immediately.
A better indicator is whether their customers are surveyed on a regular basis, using a third-party verified program to calculate their Net Promoter Score.
Often manufacturers are limited in their ability to measure service performance except against their internal standards. Manufacturers don’t call each other to compare their respective service or operational results.
Dealers, on the other hand, have an advantage in that they can objectively measure their performance if they make an effort to join a performance group such as Pros Elite 100 or Copier Dealers Association.
These groups set industry benchmarks for service and operational performance (what excellent performance should look like) by regularly measuring the service performance of their members.
They work with their members to continually improve their performance which directly benefits the experience received by customers. Since the members of the group (other dealers) represent products from various manufacturers, the data and benchmarks are objective.
Is There a ‘Buy Local’ Advantage?
This one is interesting; is a dealer or a manufacturer’s direct branch more vested in the local community? It is worthwhile taking a look at the differences here; profitable dealers typically invest in their communities, and that’s where their money stays.
Often, they are highly engaged in the ‘not for profit’ sector in meaningful ways. If that is a core value of your organization, perhaps that provides a better alignment for you. It is worth checking both out to see what they do.
No Single Correct Answer for Dealer vs Direct
As you can see, the question “Should I Buy My Office Equipment from a Dealer or Directly from the Manufacturer?” has many aspects to it. However, if you take the time to assess both the dealer and the manufacturer based on some of the criteria above, you will undoubtedly end up with the vendor that best meets your needs.