Shimano Europe Sales Offices Change Pricing Strategy
NUNSPEET, the Netherlands – Per January 1, 2017 Shimano Sales Offices will implement a new pricing strategy in concerned European countries in order to respond to changes in distribution channels. For this strategy customer types have been redefined. Next to OEM, wholesale and retail, a new hybrid category is added for which specific delivery handling and conditions apply.
Erik Naberman is Managing Director Shimano Benelux and co-responsible for the new Value based pricing strategy. He says, “Both markets and consumers have significantly changed while our pricing strategy stayed unchanged for like 20 years. Function in the distribution chain as well as volume have for decades been the most important criteria for the conditions when buying Shimano products. A historically developed fact. However times have changed so this is what we seek to up-date now.”
Customers categories re-defined
Naberman: “Based on the outcome of extensive market research we have redefined customer categories. What this boils down to is that instead of the three existing customer categories, we now distinguish the following four:
Each of the four categories have targeted supply conditions.
“Among them we distinguish a hybrid customer as one that performs multiple roles in the distribution of Shimano products. For example OEM/wholesale or wholesale/retail functions, for which the quantity sold to each function will be determined and corresponding conditions applied to each function’s purchase.”
Other purchasing conditions
Naberman: “To present a more extensive example on this; wholesalers are stock-holding, often have a sales team to inform and advise about the product range, and offers after sales service. Currently, in certain cases, it happens that ‘the wholesalers’ only order when they themselves have received an order. Then they are just passing on the products. The added value they had, is lost. In these cases the intended function of such a customer has changed and, as we see it, different purchasing conditions are to be applied. Another example is the bicycle manufacturer selling his overstock as after-market products, and is in fact stepping in the wholesaler’s role. This conflicts with the brand experience we want to convey. Retail products are supplied with Shimano packaging including the required user information, which is not the case with products supplied by a bicycle manufacturer.”
Defined criteria determine the chain’s (surplus) value
Next to the redefinition of customer categories, Shimano has searched for a system to determine the added value in the distribution chain. Here several criteria have been determined. These are more or less applicable on three of the four customer categories. In the scheme concerning OEMs there are no structural changes. But for retail, wholesale and hybrid customers ‘Value Based Pricing’ will be applied from January 1, 2017. The most extensive valuation-system will be in place for retail customers, based on four criteria, being;
- Product range mix (width and/or depth in Shimano product range on offer)
- Brand mix (instore brand profile, web presentation, tech knowledge and service)
- Efficiency (planned ordering, MyShimano-online order system for retail customers use)
- Different criteria for on- and offline channels
“For a consumer retail is retail, whether it’s on- or offline.“ says Naberman. “There are no on- and offline worlds, by now we live in a OmniChannel society. Nevertheless, we have described different on- and offline criteria. In the case of online retail we value several matters important like for example digital brand experience, 24/7 ordering possibilities for consumers, speed of delivery, helpdesk accessibility as well as functioning. The focus for these criteria is the consumer, and the value added by our customer. If and when all this is in order, the retailer will get more attractive conditions. For offline retail we partly apply these and partly other criteria to assess such retailers for bonuses or discounts, like the level of technical servicing or instore presentations.”
More ‘honest’ system
Naberman: “We can see insecurity at for example dealers with a business model not focussed on volume. Previously such customers could only partly make use of our (volume) conditions. For them, by achieving high scores on other value based criteria, they are now able to get better conditions. With that our new distribution/pricing system works for them more honestly.”
Price harmonisation in Europe
With this new Value based pricing strategy Shimano’s own Sales Offices are moving towards price harmonisation With that base prices for Shimano products will be harmonized in a big part of Europe; Poland, , Italy, Norway, Sweden, Finland, Denmark, France and the Benelux. Based on the defined customer categories and valuation using the aforementioned criteria, either purchase discount or a bonus is set. This ultimately defines a net purchasing price. Naberman concludes: “We believe this is the right way to get to a healthy and fair distribution system.”
New value based pricing strategy starts January 1, 2017
In September 2016 Shimano started to communicate its new distribution/pricing system. Actual implementation of the new system starts January 1, 2017 for retail, wholesale & hybrid customers. As stated above for OEM no big changes are expected.
The changes apply to all of Shimano’s own sales offices. They commit to one single European price structure. With this Shimano strives to achieve price harmonization in a big part of Europe. Independent distributors are free to maintain their own pricing policy, but Shimano will inform them about the new strategy.