Steve Jordan asks, with prices in the industry more depressed than ever before, is it time movers refused to play the game anymore?
We are now well into the conference season and, from my discussions so far, there seems to be one subject in the forefront of everyone’s minds: Money! (Or the lack of it.)
In my 45+ years in this industry I don’t believe there has ever been a time when prices have been under such pressure. There seems to be a ‘perfect storm’ with pressure coming from the corporations and the RMCs, from the rise of the lump-sum culture, the reduction in average shipment sizes, and the ubiquitous Internet that has allowed private customers to compare prices at the click of a button, with very little regard for service quality, and ride the market in a race to the bottom.
So, what can be done about it? It seems to me that it’s time for a change before this industry degenerates into a scrabble of servile suppliers trying to scratch a living from what the all-mighty ‘market’ permits them to retain. We are already well down this line. It’s true that we have become more efficient. Technology allows us to do more work with less resources but being expected to pass on all those benefits to clients in the form of lower prices, which seems to be the norm is, in my opinion, commercial suicide and morally wrong, especially at a time when being in the top flight of international movers is becoming more expensive.
Michael Dunstan from OSS in Australia summed it up. “Whilst technology has created efficiencies and cost savings, we forget that being a compliant business now is outweighing our efficiency savings. We currently spend AUD150k a year on compliance for our group. This has just become a business expense that is being absorbed and forgotten.”
While customers might expect a first-class service for a budget price, they have little understanding of the costs involved and it’s the moving industry’s job to enlighten them. Movers must develop the confidence to be proud of what they do, make sure customers recognise the difference, and insist that they be rewarded properly.
But that’s not easy. As industry consultant Mark Oakeshott puts it. “Very few companies in our industry have sufficient brand recognition to extract premium pricing from customers and therefore the majority will always be subject to the laws of supply and demand. As long as there is sufficient margin in the business for a company to provide the service at the same quality, at a lower cost, there will be price pressure.”
And, of course, the cost of entry into this industry is generally low, so there is always someone who will do it cheaper. The trick is to make sure customers understand the difference.
Selling the difference
Mark Oakeshott again: “I feel many moving companies are failing in their sales and marketing messaging - an inability to create differentiation. All too often sales representatives rattle off a list of unique selling points without taking the time to explain the value of each so the customer can more easily visualize what might happen if they use a cheaper, less qualified company. If you can’t articulate the benefit, then the unique selling point probably isn’t worth mentioning.”
Jesse van Sas from FIDI said that it’s necessary for companies to dare to explain to customers why they are more expensive than someone else. “Sales is not about being the lowest in the market,” he explained. “It is about convincing the customer that you offer the best value and that in the long run they are better off with you. If your corporate customer is truly interested in a long-term relationship with their mover, then they will accept the fact that the mover has to make a living as well.”
Many companies are justifiably proud of their recognised quality standards. But how many of them effectively use these to overcome price differentials? Anyone, for example, that holds a FAIM accreditation, ISO Standard or is a member of a trade association and doesn’t know how to sell its benefits, without a moment’s hesitation, is part of the problem. I really believe that the industry’s inability to do this consistently well has been part of its downfall and has allowed low-level competitors to fill the vacuum.
However, quality standards might not be enough today to make the difference. Michael Dunstan again: “Many countries now are so saturated with FIDI/ISO accredited companies that being of that quality has now become irrelevant. This used to be the selling tool but when the consumers now ask what makes you different – well what does?”
The problem is further complicated because, in the corporate world, sales people sometimes don’t get the chance to sell to the customer in the traditional sense.
It’s important for companies to know their costs otherwise they can easily be selling their services at a loss without realising. Conversely, they might be able to charge less, get more business and still make an acceptable margin.
“I am often astonished that companies will willingly knock off 5% or 10% of their going rates, without even having a clue if these rates are correct,” said Jesse van Sas. “Companies need to perform regular cost exercises to get at the real cost of the moves.”
Ian Studd, Director General of BAR in the UK agrees. He said that companies often sell against each other not necessarily against the value of the proposition that they deliver. He also said that BAR was developing a cost modelling template to help its members. “If we don’t truly understand cost, how can we hope to properly consider pricing strategies?”
Of course, nobody is forced to work for nothing. If the money is not right, you just have to say no. But, according to Jesse van Sas, it’s not that simple. “Procurement people have very clever ways to get you to lower your price. They will keep going for the next reduction as long as you say yes to the previous one. You have to learn when to say no and hold your ground. Saying no takes courage but, in the long run, you are better off passing these jobs on to your competitor and going after more profitable work. In that respect, I would recommend any sales person to follow a procurement course. Knowledge is power!”
The more I study this the more I am convinced that, to achieve change in the industry there needs to be a complete change of attitude. I believe it can be done. The smallness of the industry, in this respect, plays in our favour. The Internet too, undoubtedly culpable in our demise, can be our friend too. If you doubt it, just look at the effect of the Facebook post made last year that changed the US government’s approach to military household goods moving [see The Mover, March 2019]. The ability for people to change what they don’t like has become a feature of our 21st century culture.
Paul Evans, Chairman of AGM Group: “The bottom line is to educate the industry not to give out such cheap rates and especially cease providing what used to be extra chargeable services – such as long carry, 6th floor, transhipment, etc. – for free.”
Time for leaders
For change to occur it will require the professional moving industry worldwide, to say ‘no’ more often. There will always be cheap companies that do not meet the standards of the market leaders, competing against them is a simple sales function. Sometimes they will win anyway. But so-called ‘professional’ companies that habitually charge unrealistic rates need to be recognised for the damage they do to the whole industry. What’s more, to play these games needs to be recognised as unacceptable in the modern industry. The international moving industry is a close-knit community. I believe that the risk of being isolated from this kinship will be a significant deterrent if transgressors are confident of being exposed. I often hear people say, when talking about poor behaviour from competitors, “I won’t mention the name, but …”. Well maybe we should be a little braver.
And there are signs that perhaps the tide is turning. Freddy Paxton, President of FIDI, said that some huge steps were made in the US two years ago. “Atlas World Group and United had a price increase and others followed suit after years of no price increases other than inflation,” he said. “Most clients understood why there was a need for an increase and how it needed to happen to keep service levels at a quality level. We have a driver shortage and labour costs are high in the US and our pricing needs to meet the demand of industry. Prices cannot continue to decline on the international side. Quality will start to be an issue and companies will continue to close if we don’t start being profitable.”
Those members of the industry that provide excellent service, and there are many, should be proud of what they do and demand that they are paid accordingly. Many of these companies claim to be market leaders, well I think it’s time that more of them did a bit more leading. It is their responsibility to show an example and set a course out of the current doldrums, change attitudes and allow the industry to be what it deserves, not what it is fast becoming. But it’s not just the responsibility of the bigger companies, everyone needs to embrace a culture of insisting that customers pay the right price for their hard work, dedication, care and talent, and stop being bullied by ‘the market’, whatever that might be.
There is an alternative of course. As Freddy implies, we could carry on as we are doing and see more consolidation and business closures in the industry until we reach the point at which the supply and demand dynamic changes. Is that what corporations really want? A sellers’ market in which prices rise and quality falls? I doubt it. Before we reach that stage, corporations need to get sensible, it’s time the game changed. It’s time the industry had the confidence to say no.