I have been trying to focus on topics that are about water instead of water ionizers. However, some of the owners in the water ionizer business keep doing such stupid stuff that I find myself being dragged back down into the muck to help inform the public and dealers alike. This article is directed towards the dealers.
What a Great Business: High Profit Potential, Minimal Risk, Helping People
When people start into the business of selling water ionizers, they typically have to purchase three or more units to qualify as a dealer. Enagic dealers are the exception, as a person is automatically qualified as a dealer once they buy a single unit and pay a small fee. The dealer discounts are usually in the 30% to 40% range (with the exception of Enagic dealers who start out at a 7% discount on their first sale).
If a potential dealer can pre-sell 2 units, they effectively get their own unit for free. Alternatively, some dealers start by bringing in two friends or family members and everyone shares the savings, which is how I did it when I got started in the industry a few years ago. The key factor is to “get in” as a dealer. Once you are in, you can sell units one at a time and have them drop shipped by the distributor.
Therefore, you can get into the business with a minimum of risk and there is no limit to the upside profit potential. The best news of all is that you are doing every customer a favor by educating them about the water and helping them purchase a machine that produces ionized water.
Where the problems start
When you have done your research, or if you have been using a water ionizer, you assume that everyone will want a water ionizer. They really are that good!
Only one out of one thousand homes in America owns a water ionizer. That means the market is wide open and the potential to make money is huge… right? It’s true, but it’s much tougher than you think.
People don’t know anything about alkaline water or water ionizers. They don’t know about pH and ORP, or plates or power, and they just don’t care. Even if people do see the benefits of ionized water, they just don’t want to spend $2,000 to $4,000 for something they can get water out of their tap for free.
When dealers find out that all their friends and family don’t want a water ionizer, they realize that they have to start reaching out to people outside of their personal sphere of influence, which means advertising. The most cost effective way to advertise to a specific niche market is to advertise on Google Adwords or to go with Facebook. The good news is that it works. The bad news is that lots of other people are doing it as well, so it gets expensive. The net result is that many dealers have to drop their price because internet sales are impersonal.
When your Distributor becomes your Competitor
The Distributor who controls the distribution for a product has a Dealer Agreement that every Dealer must sign if they want to sell the product. The Agreement is written by the Distributor of course.
One of the clauses in every agreement is a statement to the effect that the Dealer must not advertise below the MSRP (manufacturer suggested retail price) or some similar term. Distributors allow their Dealers to offer non-price incentives of up to $200. This all seems great because the Distributor doesn’t offer the discounts from their website, which means no competition from the Distributor… right?… wrong if you choose the wrong company to work with.
Choose Your Distributor Carefully
The Distributors are the industry builders. They are smart. They are risk takers. And some of them are only in the business for the money.
Distributors understand that they need Dealers to help them grow. Dealers earn as much money or more money than Distributors on the sale of a water ionizer. While some Distributors recognize the value of the Dealers taking the story to the street and completing the sale, others only see dealers making a lot of money without assuming any risk or responsibility for technical support and warranty issues.
Some Distributors see the profits that Dealers make and want to jump in and grab the Dealer profits where they can. They typically do this in two ways.
One way is for the Distributors to set themselves up as one or more Dealers under another name. Of course they don’t advertise discounts, because that would be a contravention of the Dealer Agreement. However, once they have a customer on the telephone, they can offer any discount they want, and they take advantage of the fact that they have a $500 to $1,000 price advantage because they are buying direct instead of paying fees to the distributor.
The Distributors think that they can get away with it, and they have for the most part. Many Dealers eventually get wise to the unethical practices of the their Distributors and move on.
Another Distributor trick is to offer potential customers special deals when they have them on the telephone. Every Dealer that advertises on the internet or anywhere else is actually advertising for the Distributor as well. When people learn about a product from a Dealer, many will visit the website of the Distributor to learn more about the brand or to speak to someone that they perceive to be a greater authority. If Dealers direct their potential customers to the corporate site, they may be sending those customers to their biggest competitor.
There is hope. One Distributor that always undercut it Dealers had all of its Dealers decide to leave the company. The Distributor announced last week that they would no longer offer dealer programs as they realized that they had bastardized their system to the point that they didn’t have a system.
I would never recommend that anyone become a Dealer for a company that doesn’t play fair.
What can you do as a dealer to protect yourself?
I would never choose to deal with a Distributor that offers discounts to customers… ever!
Distributors should advertise on their corporate site that they encourage all customers to purchase from Dealers. They should also advertise that they don’t offer discounts in order to protect their Dealers.
Before considering becoming a Dealer for a company, I recommend that you call the company as a prospective customer and see if you can get a “deal”. If you can get a “deal”, then that company is going to be your competitor. Even after you have signed on with the company, it is fair to test the company from time to time with an investigative phone call. If the company is playing fair, then they will never have anything to worry about.
It is more difficult to discover Distributors who hide the fact that they are also Dealers. The good news is that Dealers investigate, and they talk. Eventually, the bad guys get busted.
Who are the Good Guys?
Enagic is the shining star when it comes to protecting its Dealers, as the company won’t allow you to purchase from the Corporation without going through a Dealer.
Alkastream sells products directly to customers from its website as it is building, but it sells at a premium thereby protecting its Dealers. I see that Alkastream actually has a “Find A Dealer” button on their website that provides Dealer contact information. Bravo! I hope every Distributor in the industry adopts the same policy.
As always, the opinions expressed in this article are those of the author.