For those of us who have been operating in the various channels of furniture procurement over the last few decades, we have all witnessed the industry shoot itself in the foot, head, chest, and almost every other limb on several occasions, with its various and complex routes to market, causing confusion and creating mistrust in both inexperienced clients and seasoned property professionals alike.
Often described as ‘the dark arts’, ‘the murky world’ or the ‘smoke and mirrors’ of furniture, it is hardly surprising when trying to explain the myriad of potential relationships (and with it margins) between furniture manufacturers, dealers, agents, wholesalers, distributors, fit out contractors, and consultants – some of whom will buy and sell, and some of whom will receive their cut simply for managing supply relationships. Whilst there is a raison d’etre to (most of) these organisations in the supply chain, it is also understandable that a common scepticism from clients on the end price that they pay in the whole conspiracy.
Project registration processes to favour tied dealers, and fixing discounts on specified products in a tendered package are a daily occurrence used to protect manufacturer’s margins and to favour loyal dealers, but this is surely akin to restrictive practice in legal terms, rather than smart selling techniques?
Don’t get me wrong – I am extremely supportive that good design has a cost to produce, R&D development is a speculative risk that must be recoverable, manufacturing investment must be worthwhile, and that time and expertise that adds value in any process should be properly paid for by the client. I know from bitter experience how frustrating it can be when speculative work is given by a client for free to a competitor. However, the furniture industry’s most common routes to market – epitomised by the inflated manufacturers’ RRP, then discounted by significant percentages more familiar to high street kitchen showrooms – still don’t produce best commercial value or use of time for the end client, or the professional project team.
Over time two common routes to market have emerged as the most popular: either dealing directly with manufacturers; or tendering an architect-or-designer specified furniture package through a furniture dealer or reseller. But in recent years a third way has both emerged and become established: fee-based furniture consultancy.
When it comes to certain large volume furniture packages (perhaps desking, seating, or storage) there can be advantages to a client purchasing directly from a manufacturer. In particular this can be in respect of the specific in-depth product knowledge that can come directly from a factory, or perhaps the bespoke product alterations that can be made to suit the client’s specific needs.
However, it can often be a misconception that such a direct relationship will automatically lead to a better price. The principal reason for this is that in such a direct client relationship the manufacturer will need to replace the role of the dealer with their own staff, and with that comes a comparable overhead of employing direct sales staff – one of the main reasons why manufacturers choose to distribute through dealer channels is to eliminate all these direct sales costs, in return for offering bigger discounts.
Another ‘con’ for the client to consider when looking to deal directly with manufacturers is the significant drain on client resource. A large value furniture contract will likely involve up to 25 different purchase orders to different suppliers across all the different applications. That may mean initially considering and liaising with on average 3 options per application (so 75 different products), and that will require both a significant client expertise, as well as a considerable time commitment. Given the likelihood of furniture selection and procurement being just one discipline needing to be managed within a move, then there is unlikely to be this sort of client resource available – nor is it likely to make financial sense to do so.
Other considerations to then mention once the selection process is completed with 25 different suppliers, is the co-ordination of all these suppliers delivering directly, each one installing, and then the administrative burden of paying their deposits, stage payments, and managing the whole invoicing process. So dealing directly for a client can work on specific packages, if the client has the internal expertise to know the furniture marketplace and the available options within that application, but it rarely makes sense across a whole move.
As a result of a number of these considerations, 65% of the furniture purchasing made in the UK is done through furniture dealers or resellers. The ‘pros’ are that it gives the client a single point of contact, removing the need for direct contact with all those manufacturers, and it also allows the client to benefit from the resellers market knowledge.
However, as buyers have become more sophisticated this route has also led to a number of purchasing frustrations:
In addition, a pre-specified furniture tender – selected by the architect or designer, and competitively pitched for by a number of dealers – will also rarely produce the best commercial outcome for the client, for two reasons: firstly, each manufacturer’s priority is to get their products specified onto the tender package by the architect. Once they have done this, they have effectively won the project, irrespective of which dealer wins the tender. So the discounts that they then offer to the tendering dealers are not their best prices, but ‘standard’ dealer terms. Secondly, knowing that there is little room for product or service differentiation in a tender submission, the dealer will submit a low margin, which will then be fulfilled with a stripped back service if successful. Anecdotal evidence of tender experiences from clients over many years have confirmed these points of dissatisfaction with the eventual outcome.
The increasing demand for transparency and partnership in furniture procurement has led to the evolution of a third way: fee-based consultancy. This open book approach can deliver a number of benefits for the client, their project team, but also for the furniture consultancy too, by solving the issues associated with the two traditional routes outlined above:
Although this consultancy route has been available in the marketplace for some years now, it has gained considerably in popularity over the last 3-5 years, now being recommended as the preferred route to clients by a number of the larger established building consultancies, cost consultants, and project managers.
The true pricing and fee transparency, the associated financial and risk management, and the partnership of a consultancy relationship offer a trusted project procurement route, which benefits all the project team – architect, designer, cost consultant, and project manager, as well as the client.
Click on the brochure image to request download.
120 Bermondsey Street
London SE1 3TX
Company Reg No: OC417702
Tel: 020 7226 8346