Menards Strongarms Small Lumber Suppliers?
Does home-improvement store Mernards use unfair business practices to stiff small lumber suppliers? According to a reader email they do, or at least did 15 years ago.
Here's how it worked.
Order 75% of their lumber from a larger supplier.
Order 25% of their lumber from a small supplier.
After lumber gets sorted through and the unsaleable pieces are found, Mernards returns them all to the small supplier.
That's right, the crappy boards from both suppliers get returned to the little guy. Kornkob writes,
But wait, one might thing, all the supplier has to do is say 'hey--this board don't have our markings on it' and refuse to refund on those pieces. However, Menards, having chosen source that was hungry for their business, knows that they can strong arm this supplier into eating the extra costs regardless, since the account is very valuable to them. When the supplier balked, Menards simply chose a different source to take advantage of.Rinse wash repeat for all manner of sourced product.
Business is a mean business. Full letter inside...
Kornkob writes:
- "15 years ago a friend of mine was a buyer for Menards (a Midwestern version of Lowes/Home Depot). He eventually quit, mostly out of disgust for the business practices. Essentially, Menards would intentionally screw smaller suppliers because they knew they could get away with it. His most concrete example was lumber.
Menards reaches out to a large lumber supplier and orders approximately 75% of the 2 by 4s they will need. They then look for another supplier who is smaller to offer the other 25% of the business to. They try to pick a company that is small enough that the Menards order is a HUGE increase in their sales for the year, making the Menards account a very lucrative thing for the small supplier. This smaller source generally is charging slightly more than the larger supplier.
Fast forward to after the lumber is delivered.
As customers sort through the lumber and discover the broken, damaged, warped, knotty or otherwise unsaleable/usable boards, Menards collects those boards and initiates the process to return these boards as 'damaged on delivery' or otherwise unacceptable. Instead of sorting the boards by supplier, they credit the smaller supplier with all the flawed lumber.
But wait, one might thing, all the supplier has to do is say 'hey--this board don't have our markings on it' and refuse to refund on those pieces. However, Menards, having chosen source that was hungry for their business, knows that they can strong arm this supplier into eating the extra costs regardless, since the account is very valuable to them. When the supplier balked, Menards simply chose a different source to take advantage of.
Rinse wash repeat for all manner of sourced product.
Norris eventually couldn't continue to screw the little guy and quit.
Admittedly this is 15 years ago and since then Lowes and Home Depot have changed the whole playing field for DIY places. Who knows if this is still the way it is done? On the other hand, maybe that's the way it is done by the bigger guys....only on a global scale. I dunno."
— BEN POPKEN
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Comments:
I guess I'm having trouble understanding why Menard's bothered with the smaller suppliers at all. Were the larger suppliers unable to keep up with the store's demand?
Cause the larger suppliers would be unwilling to replace the defective boards. The smaller suppliers were afraid of losing such a big customer.
larger suppliers would be unwilling or harder to negotiate with on returning bad boards that had been sitting on a store shelf for upwards of a couple months. By dealing with smaller suppliers who don't want to lose the business, they can use their size differential to leverage some influence there.
This is outrageous. We should notify President Clinton.
Wal-Mart does the same thing every single day. I worked for a Wal-Mart supplier and the WM buyer basically dictated prices to everyone. Wal-Mart business is huge, no matter who you are or what size you are.
Take a look at Rubbermaid. Their resin prices rose so they tried to get Wal-Mart to accept higher wholesale costs. Wal-Mart flat kicked them out of their stores which is why you can now only buy that crappy Sterlite plastic storage at Wal-Mart.
And suppliers are powerless to do anything about it because if they band together, they are price-fixing. The days of manufacturers price-fixing are dying. The price-fixing these days is done by the retailers.
Walmart also gets manufacturers to make crappier versions of their products to sell in the stores. I remember reading a while ago that they tried this with Roper lawnmowers and Roper told them to to screw.
Ah the bliss of a Walmart-free life.
And um, isn't returning the crappy boards to the little guy illegal?
Business is always mean, but lawsuits with big fat financial judgements can reign the evil doers in sometimes eh?
I hope we can find someone who says if this is still common practice -- or if other home improvement warehouse stores do it.
The Menard's I shop at has a dirt cheap "unsaleable boards" section. Outside, unprotected from the weather, and yeah those suckers are UGGGGGGLY. We buy them for 77 cents for 12 feet of 2x4 and use them in gardening projects where it doesn't matter and they'll rot out in five years no matter if they're perfect or half-destroyed. Would those be the types of boards that get sent back? Does this mark a shift in policy, or just a splitting of how they deal with the boards -- some sold cheap, some returned to small supplier?
Indeed VA_White, this practice is very Walmart-ian. (Wal-martian?)
Alas, I have no frame of reference for Menards since I've never even seen one before. I've always thought the name was funny though, like a pirate's way of saying "my testicles".
Yarrr...
@DeeJayQueue
I believe I read that same article (NYT maybe?). But I thought that was Snapper lawnmowers...?
I'm guessing that it's both -- they claim the credit and then re-sell them dirt cheap. Notice that the original letter didn't say that they returned the boards, just that they claimed a credit.
The Menard's jingle has them singing "Save Big Money at Menard's" -- a Minnesota blogger once wrote that her friends began singing "shave big bunnies at Menard's." I've never heard one of their commercials since without at least giggling. They are a big-box predator chain -- all of them do business like this. It's the ultimate consequence of a "low prices are always best" mentality.
@Paul D:
I remember it being Snapper as well--and the story was featured in a book about Wal-Mart.
I thought Roper made low-end appliances, not lawnmowers.
I wouldn't be surprised either if the small lumber retailer has higher prices. Getting the credit from them would probably make the company some extra dough.
That was a detail I forgot to include. Norris said that often the prices were within a few pennies per unit but generally the smaller joint was higher.
The Rubbermaid story is true. Take it from one who was there. The people who made the decision were quite proud of themselves that day. Almost as much as they were for the Showdown at Searcy, a watershed moment in labor relations history which nobody seems to know about.
I believe it was Snapper too. Taking the Wal-Mart deal would have killed their network of dealers.
I like Menards but for all the places that sell lumber, that is the last place I would go.
The only problem i have with this is, don't mills stamp their product so that the source can be identified?
I could swear i've seen such on lumber i've purchased.
If so it would seem to me that one of those small mills would have sued Menards big time over this.
I think that is highly un-ethical of Menards and choose not to shop there.
"His most concrete example was lumber."
Heh, do you think this was intentionally meant to be funny? :)