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January/February  2004

Nags Notes
    hot topics

Whatís Fair
by Catherine Howard

Itís always easier to write an article like this when you know how readers think and what they would like discussed. Reading Nancy Heffronís letter in response to my last article (see November/December 2003 AGRR, page 6) has afforded me that opportunity. Nancy was responding to the idea of fair labor, which Iím sure everyone likes and few would dismiss. However, she brings up a question that I know is on many minds these days: fair profit on glass. Nancyís view is that all glass shops should profit the same amount from the glass, along with fair labor. Iím not sure I understand exactly what she means, but I can offer my interpretation.

Fair Profit
Iím not sure how one would go about ensuring that all glass shops make the same profit on glass. That would mean every manufacturer and distributor would have to guarantee a single selling price to each and every customer, no matter how frequently they buy or at what volume level. I could be wrong, but I think that would be considered price fixing by the manufacturers and distributors. Since most of those folks loathe crossing the federal government, this isnít going to happen, even if their lawyers would allow them to do so.

So thatís one problem. Hereís another. The principle of supply and demand is a fundamental law of economics not easily ignored.

Then there is the problem of getting all shops to manage their inventory, breakage, shrinkage and delivery costs at the same levels. Some folks might consider that a violation of their inalienable right to operate in a free market by impeding their ability to develop any competitive advantage.

Selling a Commodity
Like it or not, this is a commodity business. There are just so many windshields that are going to break in any given market area. Unless you are willing to hire a gang of restless youths with BB guns, you wonít be able to increase demand for your services. (Please donít misconstrue that statement as a National Auto Glass Specifications International (NAGS) initiative. We do NOT support anyone doing that. Besides being illegal, you will be discovered and punished financially.)

The only way to grow a business in a commodity market is to take it away from someone else. Thatís the way it has always been in the glass replacement business, and that is why we have folks giving away kits and labor along with high discounting. The fact that some large chains are just better at that and much more aggressive is what gets everyone steamed while the whole market gets dragged down.

Coming Together
Now that the whole market has agreed to bundle labor with the glass, when the price of glass falls it takes the labor with it. I donít know too many folks in business today who believe their labor costs have gone down over the last ten years. However, it is the apparent belief of a vast number of operators in this industry that this is NAGSís fault and, therefore, our responsibility to mend. Furthermore, there seems to be some feeling that NAGS somehow wants to cause this suffering while supporting the larger chainsí ability to profit from ever-increasing insurance company discounting. Iím not sure what people think we are getting out of all this; neither the chains nor the insurance companies pay us any more for our products than the rest of the market and neither owns any part of Mitchell International (NAGSís parent company) or NAGS.

Thereís another problem, too. Go back to the part about supply and demand, commodity markets and competitive advantage. Even if we are successful in unbundling the labor from glass and establishing fair value for the labor, that doesnít mean someone isnít going to start discounting the labor. But, when this happens, at least whoever does it should have some ability to determine if there is any money to be madeóthat is, unless he is not aware of the true costs. But then that has always been a risk in this business. 

AGRR

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