Sole supply agreements have been creeping into the industry. Nick Dutton explores why they aren’t always good news for fabricators or suppliers.

The call from BigCompany Roof Systems’ sales director came out of the blue. ‘We’d like you to come up to review your trading relationship. We’ve discovered you’re selling OtherBrand conservatory roofs and we cannot allow it.’ Peter Willoughby’s eyebrows shot up. His cheeks reddened. Not many people spoke to the MD of FastGrow Trade Frames like that. ‘It’s not a secret. We’ve promoted both brands in our advertising for months, leaving the choice up to customers. If you want to see me you can come here.’ The meeting did not go BigCompany’s way. ‘My customers are choosing OtherBrand’s roofs instead of BigCompany’s. We believe in giving customers a choice, and our total sales have risen considerably since we added OtherBrand. I’d be stupid to drop them. If you force me to choose, you’ll be losing a lot of roofs.’ It was an unhappy end to the relationship.

Most of us want our customers to give us all their business. We’d be daft not to. We all want long-term one-to-one relationships where we are the supplier of choice, the only one in the frame. It’s not just ego. Research shows conclusively that – as in our personal lives – long-term sole-supply partnerships do best. Each partner has the opportunity to learn about each other, work towards keeping each other happy and build up trust between them.

Onerous restrictions
But there is a world of difference between willing relationships and enforced relationships. Research also proves conclusively that relationships break down more frequently when one partner handcuffs the other to prevent them straying. If things aren’t right, if one party neglects, cheats, bullies or forces itself on the other, if the relationship is lop-sided when it comes to rewards it can’t last.

There are examples of suppliers trying to impose onerous restrictions on their customers all around us. Most accept that win-win relationships, where both sides feel they are getting an equal deal are best. But equality looks different when one side holds most of the cards. The temptation to be a little too clever, or to take a short cut when you can, is very tempting.

An offer they couldn’t refuse
Take Unilever. To improve the distribution of its Birds Eye Wall’s (BEW) ice creams, Unilever supplied ‘free’ freezer cabinets to its stockists. A seemingly generous offer, but it came at a price. The customer could only use the cabinet for Wall’s ice creams. Mars, the competition, was not happy, and nor were shops who wanted to offer a choice. Unilever suggested rivals could supply their own freezer cabinets, which Mars was happy to do, but many small shops didn’t have room for another cabinet. In 1993 the Competition Commission got involved and BEW agreed to change the wording in its terms of trade that prevented customers offering a choice.

In the window and conservatory industry there has been an increase in restrictive sole-supply agreements. Some agreements are genuine efforts to provide stability to build proper partnerships. But most agreements to prevent competition are a sign of weakness, reactions to increasing levels of competition. Suppliers who are losing out fear the worst and try to tie in as many customers as they can.

most agreements to prevent competition are a sign of weakness, reactions to increasing levels of competition

Fear of competition
What goes wrong when fear is the motive? Once customers sign up, suppliers may take them for granted. Once the relationship is governed by fine print, and defined by contractual obligations and restrictions rather than shared goals and mutual attraction, complacency begins to replace enthusiasm and emotional commitment.

What if circumstances change? What if service slips and their promises are unfulfilled? What if product development is put on hold for the third year running, or their products are no longer competitive? What if they are overpriced and pad out their price rises? What if you pay on time but breach your credit limits because you are growing fast? Will they be flexible and understanding? Will they listen? What if they don’t keep their side of the bargain and fall short of expectations? What if they start selling direct to your customers? You are locked in. You may become uncompetitive because they fail to keep up.

The Synseal way
We believe in fairness and open dealing – it’s better for everyone in the long run. Competition is healthy, it sharpens us up. Sole supplier agreements sound good in theory but can be unhealthy for both supplier and customer. However you dress it up you cannot buy loyalty, you have to earn it. You can only buy the appearance of loyalty.

And what happened to FastGrow and BigCompany? One is continuing to grow; the other is struggling to keep its customers. No matter how big you are, you can’t impose your own rules on a relationship if they go against a customer’s best interests.