Glasgow-based bathroom retailer Derek Miller adds his weight to calls to level the playing field in Europe and stop giant German wholesalers attacking our home market
At the recent kbb exhibition in Birmingham, I took part in a conference panel discussion with my fellow kbbreview columnists Paul Crow, Malcolm Scott and Trevor Scott, chaired by the inimitable Andrew Davies.
Apart from the Madonna-like earpiece slipping constantly off my head, the experience was most enjoyable, with Andrew doing a grand job of controlling four natural, if opinionated, mavericks. For the kitchen chaps, the big issue of the day was the likely rise of the retail franchise model over the next few years driven, as it would be, by the major European brands looking to control their own destinies.
In terms of bathrooms, however, the hot topic was undoubtedly that of the emerging presence of massive online German wholesalers in the UK trading arena. Paul had dealt with this problem area very eloquently in two recent columns – one highlighting the destructive potential of such companies to UK retailers, and the other painting a bleak picture for the future of Britain’s traditional high street.
As the march of German wholesalers has been the elephant in the room for a number of years, Paul showed a lot of courage in going public with his views, as many people (retailers and manufacturers alike) have preferred to brush the issue under the carpet since it first arose.
The decision by the Competition and Markets Authority to attack selected suppliers for having the audacity to take charge of their own pricing strategies has created a feeling of paranoia within the industry, ensuring that manufacturers prefer to keep shtoom rather than bringing it out into the open.
I find it preposterous that any manufacturer that owns the intellectual property rights to its own ranges, cannot take charge and determine the price that it takes to market in different channels. After all, no consumer is forced to buy a specific shower, bath, or basin when there are many alternative options on the market, so why shouldn’t manufacturers be able to act to protect their own strategic interests? Whatever the case, unfortunately, the law is the law, even if that law is an ass.
This is an impossibly complex issue. German wholesalers can take our business, protected by European fair trade law and we are powerless to intervene. The fact is that certain products have lower price points in some European countries than they do in the UK.
In the old days, with strict trading borders, this didn’t really matter. In the digital age, however, where consumers make global purchasing decisions based on best price, the ability of German wholesalers to win British market share matters enormously.
The major problem here is the lack of a level playing field between Germany and the UK. It is not that we are afraid of competition or 20% discounts, it is that it is unacceptable to compete with discount levels greater than our purchase prices.
What isn’t simple is the type of action that needs taking to level international playing fields. British retailers enjoy the service provided by the UK operating divisions of the great brands. The fact is that these divisions come at a cost, which may have to be covered by additional mark-ups, especially where the UK division is acting as its own distributor to UK showrooms. The more this situation deepens, the more apparent it is that the solution to this problem must lie with the great European brands at head office level in Germany and surrounding countries.
Brands must work with all their European divisions to create a pan-European pricing model that takes account of operating costs across its trading companies. If this means that prices are pushed up in the home market, but down in foreign markets, so be it. They must also look at their routes to market across the Continent. For example, perhaps it is best to manage their own distribution channels directly to retailers rather than be held at the mercy of colossal distributors in the home market who ride roughshod over everyone else?
I am heartened, however, that one great manufacturer at least is waking up to the challenge. At its recent retailer’s conference in Hertfordshire, Hansgrohe put the issue at the top of the agenda and explained both the dilemma in which it finds itself, and its medium-term plans to tackle it head-on.
UK managing director Martin Mongan announced a raft of measures to redress the balance to protect the position of the brand in the UK, as well as its retail partners and consumers. Over the next three years, and with the declared support of its German parent company, Hansgrohe UK will work to ensure a major reduction in the discrepancy between British and European pricing of its products.
I heartily applaud Martin in putting his head above the parapet and his acknowledgement that it won’t be rectified overnight. Hansgrohe has highlighted the important role played by its independent retail partners and it is up to the others to follow suit.