Ethical Dilemmas and the DPH Industry

You can't open the papers today without seeing front-page news of corporate malfeasance. From Tyco and Enron to WorldCom and Martha Stewart, corporate governance and business ethics have come under public spotlight. Mutual fund scandals, shady financial deals and legal maneuvering for the self-aggrandizement of publicly traded company executives grab headlines. They are symbolic of a new challenge facing all businesses, including those involved in the decorative plumbing and hardware industry.

Although most businesses in our industry are privately held, decorative plumbing and hardware is not immune to corporate hypocrisy, dishonesty and business practices that show disrespect for employees, suppliers and customers.

For evidence, think back to the recent K/BIS. The echo of security personnel voices in the New Products Pavilion continues to resonate. "No photographs, please. Do not take pictures. No cameras allowed. Anyone taking pictures will be removed from the exhibit hall." Over and over again, the warnings were issued, but even those admonitions failed to keep cameras off the show floor or cheap copies of innovative design, advanced technology and unique applications from appearing in exhibits at the show and in showrooms throughout the kitchen and bath marketplace.

Many of the copies are sold at a fraction of the original cost because the companies producing them don't need to invest in research, development or design. Their labor supply is often plentiful and compensated at rates that are impossible to match in a developed country.
And, there's no requirement to comply with environmental regulations in many of the places where these copies are made, which lowers the cost of creating them even more.

So, what's the answer? We must continue to innovate. If we don't, the defining characteristics of our industry will gradually erode, leaving price as the primary differentiator.

It's easy to use those who mimic designs, manufacture them in the third world and bring them to market as commodities as scapegoats. But we can't use that as an excuse for declining market share or other issues.

We live in a global economy where markets are unforgiving. We need to reward the entrepreneurial spirit responsible for the industry's success.

Showrooms must continue to educate their sales personnel to understand and appreciate the differences between original designs and copies. They need to recognize quality differences between different components, as well as finish quality and other defining factors that differentiate products.

Once they can do this, they can better educate customers so they can make informed purchasing decisions about these products. For that reason, the Decorative Plumbing & Hard-ware Association Education Program is providing an invaluable service to the industry. This program is the only educational offering that combines technical training with guidance to improve sales capabilities.

Industry organizations such as the DPHA and the National Kitchen & Bath Association and publications such as Kitchen & Bath Design News, among others, must continue to provide forums where innovation is recognized, honored and promoted. The industry has to take advantage of awards programs to showcase creativity and to promote the differences between unique product lines and copies.

This isn't easy. Clarity is clouded further by intellectual dishonesty among those who claim to be industry advocates. There are several highly visible industry professionals who make their living as consultants and professional conference speakers. They supplement their income by charging fees to mention company names in their presentations and they do this without notifying their audience of the compensation that they receive.

Showrooms and manufacturers must consider the disservice that paying these marketing and consulting fees has on their businesses and on the kitchen and bath industry as a whole.

Returns
Returns rank as one of the most hotly debated topics in the decorative plumbing and hardware industry. Most returns occur when:

  • Showroom personnel err in writing customer orders.
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  • The products do not meet customers' needs, forcing them to return the goods for products that do meet their needs.
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  • Manufacturers err, e.g. ship the wrong goods.
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  • Goods are damaged during shipping.

Showrooms understand that they are differentiated from competitors by their merchandise, service quality and value-added services. Merchandising differentiation means a showroom can distinguish itself by carrying products that consumers cannot find at other outlets.

Service quality translates to an ability to meet and exceed customer expectations. To that end, value-added service is considered by many to be doing whatever it takes to make a customer happy. And, therein lies the challenge to having an effective and ethical return policy.

Does doing whatever it takes require leveraging a relationship with a manufacturer to take back goods simply because the return request is made by a good customer? Too much time, energy and money is spent looking at the cost of accepting returns. The industry needs to focus its attention on why goods need to be returned.

Showrooms may be reluctant to carry merchandise from manufacturers that are not accountable for the quality of their products or the quality control procedures used to process orders. Showrooms cannot maintain a customer base if their personnel consistently err in processing orders.

The industry needs to stop blaming everyone else when a problem occurs. There must be accountability combined with competence to effectively develop, implement and administer an effective returns policy. Training and quality control should come to the forefront. If this effort is not made, the credibility of the industry will continue to come into question.
Unrealistic customer expectations also erode credibility. These expectations are the result of
several high-profile national companies that, in the guise of outstanding customer service, have created a mentality that anything can be returned for any reason.

As a result, showrooms and manufacturers receive products on return for reasons that are utterly ridiculous.

We know how old products are because we date label each piece that we manufacture. Many of our peers in the industry follow similar practices. We know when a returned product has been used, yet showrooms will fight for their good customers, even when they know that their arguments are specious. But the question that should be asked is, how valuable is a customer who would ask the showroom to comprise its integrity for a new product or a repair that is not defendable? What effect does that have on the showroom's reputation?

Pricing
The issue of ethical practice also is raised in the pricing arena. If there are inherent discrepancies in pricing structures that do not allow for apples-to-apples comparisons, the only by-product is distrust from every component in the supply chain.

Manufacturers that rely on the professional showroom need to be true to that relationship. They can't have one pricing structure for the Internet and one for retail. Manufacturers need to resist the temptation to go around the showroom when they receive price requests from contractors that may be looking for a better deal if they can buy direct. Those that attempt to have their cake and eat it too, often find that they only receive crumbs.

Recently, the DPHA Web site featured a situation where a showroom received an exclusive product line. The showroom advertised and marketed the merchandise at its own expense with substantial success. After creating produce awareness in the region, the manufacturer joined a buying group that has a showroom member located two miles from the first showroom. The representative for the territory claimed that the exclusive could no longer be honored because of the contractual obligations of the buying group.

In this case, the manufacturer had a business decision to make, but this scenario serves to highlight the importance of relationships in the decorative plumbing and hardware industry.

We are a small industry segment where there are few unknowns. Manufacturers, representatives and showrooms all have to work in concert to succeed. Principals need to focus on developing the right relationships with partners in the supply chain who are committed to mutual success.

The right relationships foster an environment of increased profitability for all. Partnerships must work both ways. If a manufacturer offers an exclusive to a showroom, the showroom must honor that commitment by resisting the temptation to carry competing products from other manufacturers.

Inherent discrepancies in pricing structures, failing to honor commitments to those in the supply chain, return policies that have short-term benefits but long-term detriments and the failure to recognize the difference between originals and copies affect the profitability of every business. If your actions create an environment of distrust, you can't build loyalty among employees.

Lack of loyalty translates to high turnover and a reputation that compromises a business' ability to properly serve customers and remain a viable enterprise. There are many in the industry that strive to be the suppliers of choice. They are committed to creating partnerships based on trust and intellectual honesty. They are accountable for their actions and foster growth and professionalism among their partners, employees and customers. Challenges in the marketplace do not dismiss the entrepreneur's obligation to continue to lead by example.

Jeff Robboy is president of the Miami, FL-based Baci by Remcraft, a manufacturer of hand-assembled bullet fixtures, lighted make-up and shaving mirrors and G-9 halogen wall fixtures. He serves as a director of the Decorative Plumbing & Hardware Association and as a member of the DHPA Executive Committee.

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