Buyer’s market?

Most of us understand the difference between a buyer’s market and a seller’s market. When times are flush, the demand for goods and services rise. People have plenty of money and they are happy to part with it in order to acquire whatever it is that they want.

Since everyone has plenty of work during these times and most of the people selling goods or services are hardly able to keep up with the voracious appetite for their offerings, prices tend to rise. We feel that there is no need to offer any discounts or incentives to get a particular job because we know there is another to be had just for the asking. We love a seller’s market.

But when times get lean, things flip over and suddenly, we find ourselves competing intensely for whatever work is out there. People know this and realize that they can pretty much ask for whatever they want and almost literally name their own price. Competition can get vicious as cash strapped shops try to get every dollar they can get in the door. Buyer’s market, right?

So why don’t we have a buyer’s market now? The economy is as bad as it has ever been in our lifetime. But instead of seeing falling prices, sellers are stubbornly sticking to their guns, refusing to bargain and even raising rather than lowering prices. Demand is certainly down and anyone who has cash or any other form of buying power should be able to get deals all over the place. But as far as I can tell, sellers and vendors are acting like they don’t have a care in the world when it comes to striking a deal and maintaining a “take it or leave it” attitude that is incomprehensible to me considering the overall state of the economy.

Am I missing something here? Can anyone explain this? I’m baffled by it!

D.D.

COMMENTS

  1. PV Archer wrote:

    I think an inherent assumption you are making is that there is infinite margins in your suppliers’ goods. Is it possible that your suppliers are saying that at the prices they are offering to you it has become a nuetral balance? That is, they make no more money if they take the buisiness than if they lose it. (This is simplistic, but may be what many suppliers see today.)

  2. Jeff Fliss wrote:

    You dont see the price of gas, groceries, or medical services going down with the economy. I think us woodworker are just plain tired of the beatings we continually take everytime there is a downturn. During good times we may make better money, but do we really clean up that well. By the time the bills are paid, and we do some updating to the shop and equipment how far on top are we really making out. A person can get an education for four to six years and be making well over the six figure mark. How far have any of us made it into the eight year mark of learning our craft. I say hang tough, there is always room for some wiggle, but don’t give it away.

  3. Randy Cochran wrote:

    Maybe they’ve got prices cut to the bone already and are so tired of selling at a loss they would rather loose money not selling than loose money selling at a loss again.

  4. Philip A. Greene wrote:

    David, I too contemplate this particular situation nearly every day; usually because a potential client has broached the topic.

    I build, market, and ocassionally sell high-end wooden objects that though fully functional, are usually purchased as art pieces. In a suppressed market, my type of work is the first to drop off the shopping list even among those who can still easily afford it. When the rare client does initiate a sales contact, they nearly always assume that your prices were inflated dramatically in the past and that you need the cash flow so desperately that you will drastically lower your prices to absurd levels. What they often fail to understand is that most of the really good woodworkers work harder and longer than they should for the pay they receive.

    I think that many woodworkers love what they do so much that they are willing to keep their prices lower than they should during the “good years” and subsequently are unable to offer discounts when the market takes a dive. I know that a few years ago I sold items at prices that kept the shop open and paid my bills. However, like many other woodworkers I know, those prices were never adequate to help expand the business with better facilities or equipment. Now, during the economic downturn, I don’t spend any income on repairs to the shop or equipment unless those repairs are essential to production right now. My goal is to make it to the end of the recession and still be in business on the same piece of property. Maybe I’ll have a “mess” to clean up but my attitude today is “I’ll deal with it later”.

    If you know that your “good ole days” prices were barely adequate, you are not going to sell your soul on a long term project just for a little cash flow. Often the client thinks you will or should and is baffled when you decline. They don’t understand that you are simply safeguarding your business for the medium to long term.

    Having said all that, I did sell an older “white elephant” object last night for $500 that would cost me $7,000 to replace if I chose to. (I choose not to without a commission) Mortgage payment was due and they don’t play nice. I guess it depends on what day it is when you contact the seller. If I were you, I’d prepare myself to remain baffled and keep making dust anyway!

  5. Randy Walker wrote:

    Our economy has been so squeezed by outside forces (imports and cheep alien labor) that in many cases there is no more room to give. We know we are getting the best prices available from our suppliers, and we cant work for less because that means closing the doors. We also know our competition is in the same position. We are as lean and efficient as we can reasonably get, and remain in business. We have also seen our competitors under price products and wind up failing any way. The only thing remaining is to hold the course and focus on quality and service as our customer draw rather than price or volume.

    Just my thoughts
    Randy

  6. Ken Mertz wrote:

    Good times, bad times, doesn’t matter. If you ask my wife I don’t charge enough, but I sleep good at night knowing I charge a fair price and oh, bye the way, regularly get return customers and referrals as well. I have no problem asking a customer up front if they have a budget in mind for their project. This not only gives a target to work towards but puts the program parameters in place so we both know if it will be a realaistic prposition from the get go. I have walked away from jobs where unrealistic expectations were written all over the wall. When I wantt to work for free I prefer to work on my own house. At least I am building equity down the road.

  7. Keith Stephens wrote:

    The rules of business have changed.

    When times were flush dealers of all kinds of products were anxious to serve another customer. Discounts and incentives were common The dealer still made a profit on the marginal revenue.

    These days dealers are are trying to figure out how to stay in business on a lower level of revenue with no real prospect for anincrease in the near future. For many businesses that means prices must go up just to survive inthis new reality. It is not a fun time.

  8. Tony wrote:

    I just had an interesting turn of events:one of my previous customers saw a $650. item she wanted but didn’t have all of the cash to buy right away. She asked if she could buy it on “layaway” (remember Layaway!). She gets the work upon full payment, I still have the item until fully paid, (to show potential customers for an order),and we’re both happy. I have started to offer Layaway to anyone who wants to participate. These are extreme times, no matter what spin is put on it. People still want nice things, and desire is one of my best salesmen. My pieces are relatively small (large being 24″), so space is not a problem. I get a regular payment each month, or every few weeks, whatever we have agreed, and the more pieces I can sell this way keeps the cash flow happening. I am a one man shop: I realise many of your readers have way larger businesses and while this arrangement may not work for many it works for me. By the way, I don’t charge interest, another attractive feature for my customers. I should have thought of Layaway years before this,it fits my business perfectly!

  9. Dee Sager wrote:

    From the wife’s point of view: When the business isn’t making enough dollars to meet the business expenses, and paying those expenses must come from the household budget, that woodworker isn’t charging enough.

    It’s better to charge a fair price and have a profit than to give it away – even if that person is a repeat customer. Our repeat customers KNOW they are getting a quality product or they wouldn’t come back. Why then shouldn’t they expect to pay a decent/fair price for that product?

    Our one-man shop is at this time, finishing wise, shut down because the baby birds in the exhaust fan window aren’t quite ready to leave the nest yet. Just a few more days . . . LOL We’re blessed that we can allow this.

  10. Paul Jensen wrote:

    I agree with Ken Metz. If I am going to work for free, I might as well be working on my own place or my shop. My wife also thinks that I do not charge enough but the doors are still open and all the bills are paid (barely). I have had several potential clients try to get me to lower my prices and I refuse to budge. What they do not understand is that my overhead has not gone down. If I am going to be paying one of my employees, I need to make a certain amount in order to make it worth while. Otherwise I might as well send them home and go fishing or something. I would be money ahead! Like Randy said, we can’t work for less!

  11. Jan Wesselius wrote:

    Some one once told me I can work and make nothing or do nothing and make nothing. I can work and after it’s all done find out I made “0″ profit. OR I can price the project out at what it’s worth and be refused. Either way I end up with “0″ but in the second example I didn’t have to work. I don’t work for free.

  12. Matthew D Fritz wrote:

    I keep one quote engraved above my bid notes and look at it every few minutes as I am hammering out numbers and thinking about how much I really want to do this job. The quote is– The minute you settle for less than you deserve, you get even less than you settled for.– Maureen Dowd.
    Can’t say enough about how true this is especially in these time.

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