5 Real Costs of Choosing the Wrong Refrigeration Product Line for Distributors

Many distributors, when reflecting on their operations, often attribute the problems to market changes or more cautious customers. But, setting it in a larger perspective, they find that much of the pressure did not arise later, but was sown when the refrigeration product line was being chosen.

By its very nature, refrigeration equipment is such that going the wrong direction in a choice will not show immediate costs but will build up over time.

1. Inventory Overstock

Sometimes inventory problems do not occur overnight but rather over a period of time. The product is not unsellable by any means. The rate at which it sells has simply slowed down. Inquiries from customers go up. Comparison shopping cycles extend. It appears acceptable to have equipment sitting in inventory for a period of time. However, if this condition persists for months, it becomes very visible that money is tied up in inventory.

More practically, refrigeration equipment is not suited to repeated price changes. Forcing prices lower is more than just an issue related to inventory distribution. It impacts future patron behavior as well. The inventory becomes less of an isolated short-term issue and more of an item that curbs the distributor’s freedom.

2. After-Sales

The problems in after-sales, which may result from wrong product line selection, may not always be problems of a large scale, such as malfunctions, but could rather be problems of a repeated small nature. It may become noticeable during times of peak activity, continuous use, or a more complex environment where the imperfection of equipment stability will become a problem.

In reality, what the dealers are really pressed about is not the repairs but the communication that never ends. They have to contend with the manufacturers as well as the customer dissatisfaction, and more importantly, the explanation that follows. Eventually, the unhappiness with the product gets translated into the assessment of the communications channel as well.

3. Cash Flow Squeeze

As the velocity of inventory turnover slows down and after-sales investments mount, cash flow strain will slowly show up. Payments have been made, but collections are stretched, thereby tying up funds that may have been used to expand the market or introduce new products.

“Once cash flow is under pressure, dealers become cautious; they are reluctant to increase inventory, advance projects, or explore new opportunities.”
Such a state may not reflect in immediate problems but will considerably slow down the overall development over time.

4. Team Efficiency Consumed

An inappropriate product line can gradually sap the energy of a team from inside. Sales staff, due to products becoming increasingly difficult to close, have to spend more time explaining and handling objections. The after-sales staff are always in a passive state, with their energy scattered to get the problems solved.

It looks like teams are keeping busy, but time truly spent on driving growth is actually shrinking. Most of the time, this internal friction is hard to quantify, yet it takes its toll over longer term on execution.

5. Damaged Confidence in the Channel

As problems persist, the market view of distributors subtly changes. Even if the actual problems were not fully channel-engendered, customers will be more skeptical in selecting partners. Once trust is weakened, it will cost much more to correct with the introduction of more stable products later on.

In retrospect, these costs do not result from a single mistake, but are a gradual outcome from step-by-step missteps in selection related to a refrigeration product line. It is easy to make a comparison of parameters and prices, but what truly determines operation difficulty is the stability of equipment operating long-term and whether there is clear responsibility when problems arise.

Smartool has experienced too many similar processes during their long-term cooperation with different market distributors. The right choice of the product line can allow many problems not to rise in the first place. The wrong choice of the same will make every further step more difficult.

This is why distributors should never make a decision to pick a refrigeration product line lightly, but it was always a question of how well their business would perform for the next couple of years.