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Business Schemes  >  Direct Buy Schemes

Direct Buy Schemes

There are many varieties of this sheme also. Basically the idea is that the organizers are supposedly in direct contact with the vendors, manufacturers and others to bring you a lower price 'directly'. Let's examine this more carefully. I will try not to present any data or statistics since these can be manipulated easily and presented just the way the presenter wants. Also empirical arguments can be refuted just as easily.

I really do not think empirical eveidence can prove anything; may be some items about our health and other limited number of personal things that can stand some testing and verification. But for other areas we will need some more solid analysis.

The resellers and distributors/wholesalers are going to add distributor costs and markups to the selling price for themselves. These costs and markups can be quite substantial and are basically the cost of selling. By the time an item/service is in a retail or other store (or online) its price can be many times the original cost of manufacture. The direct buy owner is supposedly trying to save you some of these selling costs. In the present day US most of the goods and services are provided by a realatively small group of very large and medium sized manufacturers and assemblers (these assembellers are getting to be very common now). These entities do not usually sell their inventories directly to the end users or consumers. They sell them through an often complex chain of distributors, wholesalers and resellers. There are many reasons behind this approach, not the least of which is one form or another of restriction of products to get them the better selling price. This of course is a form of price discrimination and gives them the most revenue. It can be shown mathematically ( but I will not bore you with that ) that price discrimination yields the most revenue compared to flat pricing. But if you need some quick evidence, witness the price structure used by the airlines. No 2 people on a plane pay the same price for the identical travel service ever. You can easily verify that next time you travel with an airline! Onwards with our argument.

We will examine this a little more carefully. Can the direct buy dealer really save you the money? I do not think so. Why?

 

This easy-to-use search will help you find appliance parts quickly.
Begin by entering your appliance model number.

Example: LSQ8243HQ0
Where can I find the model number?
The model tag is usually in a visible location, on the front of
the appliance (not on the back).

 

First of all the direct buy dealer cannot get a better price than any distributor or wholesaler. He is not even buying anything! He is buying from the manufacturer only when a member actually places an order. So he/she does not have much buying power, at least not as great as for example Sam's club and many other clubs. He is only offering a clientel to the manufcturer as his buying power. He does not actually buy anyhting like a warehouse or Walmart or Sam's club does. He is typically not as big as a distributor or wholesaler, since if he/she were, he/she could make plenty just by distributing the products and he/she would not need to go through the production and fuss involved with his/her membership and selling schemes. Remember the objective is to make money and in doing so the less the hassles they have to go through, the better. They want to make money the easiest way possible. This is fundamental in US business and has repercussion of a serious nature for our economy and its future. To read more on this topic click here since its a different subject. So the price he/she is going to have to pay for his/her members is not going to be much different than the ones paid by the distributor/reseller. So the only way he/she can offer a better price would be to sell directly to the end-users an not the resellers. Otherwise he/she is no different than any other distributor/reseller. But if he/she is going to sell directly he/she will have the selling costs as usual, the cost of promoting the direct buy club plan, advertising costs, and the host of people selling his/her scheme to prospective members  etc., (Have you seen the direct buy television and other commercials? They are not cheap and you are paying for them!). There are hosts of costs/taxes he/she must allow for also. Also the shipping costs are going to be higher since items will be shipped invidually rather than trucked on pallets or other large scale transportation schemes used by manufactureres and distributors. So the direct buy seller will typicaly add a freight item to the price and also a handling charge to boot and don't expect it to be a nominal one either. Then there will be warehouse charges and above all the cost of waiting (on your part!). You will not get your item rightaway and that is not a monetary cost but is definitely a significant cost item.You will typically have to go get your item and transport it yourself. That is a cost! Unless you are very credulous ( which I doubt!) and thrilled by the apparent low price and apt to ignore the the assocaited cost items, both monetary and non-monetary, this is not going to end up any different than buying in a store and may even be worse. I have actually tried it and saved nothing. For more information on this click here.

Remember you will also be paying a hefty membership fee. By the way the membership scheme helps the direct buy or the club with their supposed buying power but you may not necessarily see that translated to you in terms of a lower price or anyhting.  

If this is not convincing or does not grab your attention then let's just drop the whole thing and address the issue from a totally different point of view. Think of this from a purely logical, deductive point of view. If the curent delivery system, from the manufacturers to to the end users was inefficient or expensive and there was a another way (such as direct buy or any other scheme or variation thereof) to bring you the items at a lower price (and a profit for them in the process!) wouldn't the current players or others (or potential ones) already be doing it or be ready to do it? (Such people are usually called speculators and although you may have some aversion to the word or the people in speculation, they perform a very critical stabilising function in a market economy/capitalist economy.) I am not going to present any evidence for this behavior; suffice it say that this is the fundamental motive behind all bussiness and can be assumed safely. This motive is the commonly called profit motive and its universal force is undeniable and exists in all of us except may be some hermits in Tibet or the mountains of North Pakistan. Continuing then, it is safe to say that the current price of an item at the current location and current time is the normal price that will clear the local market for the item(s) in our current monopolistically competitive market.

If you could do better than this price you will be doing it at a cost. You will either have to wait, or drive to another place or will have to bear some other cost such as inconvenience.

Remember always the economy is set up on the profit motive. If the price was better elsewhere people would be rushing over there until the supply is depleted and the price rises or it is no longer available. In other words the price differential can only be the cost of transportation or some other cost element and no more. If the price structure is distorted by fiat or regulation or other means then there will be black markets and the associated administrative problems and social tensions. The profit motive is very powerful. That is why you can safely assume that there are black markets for just about every product at any time and seem impossible to eradicate. By the way, if you buy through a direct buy seller you will also have to learn their modus operandi and that is a cost too.

 Conclusion:

All in all, the direct buy may get you a nominally lower price but the end cost is not going to be any different than buying at a store or online.

I tried a direct buy seller once. I bought  office furniture. It was sure cheaper but by the time I added the freight, the handling/warehousing charge, the cost of pickup, waiting, the direct buy charges, I saved less than $100.00 on a $2400.00 item!  You decide!  Of course I terminated the membership and lost the dues of over $1000.00!

My Recommendation:

Do not ever use a direct buy scheme. It is a scam. Your membership gives them a buying power to use to their advantage and not yours. I do not doubt that they do not want you to lose and are not consciously trying to scam, but that is how it is working out. You are not going to get much of a price advantage. They are in this for the money also! And it is going to come from you! It all boils down to one thing and you already knew it: Nobody is going to get you something for nothing. Then why should you go through the hoops of direct buy when you can get the item directly. It is better to stay with the traditional means of delivery. Remember there is enough attrition and competition to get a good deal, if you only do some looking which you can do easily in this age of the internet and the mobile phones. My guess is that the traditional outlets will deliver value because they are evolving and growing like everybody else and are learning! These sources also vary greatly in value and delivery. But you can do a little homework and get a good value. My recommendation is that you check 3-4 places and then make the buying decision. You do not want to look for ever either since that is also a cost element!

Here are some links to some premier sites. I have used some of them and found them very good and sophisticated. See if they are any good. Below the recommendations I also list some of the ones to shun since you can easily do better than those. I have also listed some that I found hard to navigate or otherwise difficult to work with. Most sites also have a phone number and you can call and get more help. I found most places to be very helpful and forthcoming. If you get good help, support and information, make sure to tell the operator that she has been very helpful and also if the site asks for a review of their service, give some thought to the service you received and offer good ratings if you felt good about your experience. In particular, let them know if the site was difficult to navigate and if it was hard to complete a transaction.

If you need batteries:

check interstatebatteries.com

It is a very easy to work with site. It has a phone number to call if you have any problems or questions. This is my fundamental rule. If you do not see a phone number right away at a website and you have to dig for it, say by going to "contact us" link and it is not there either and they rather have you send an email to them, then they are into reducing their costs and not into customer service. A lot of people like to work with a live operator rather than a website or may want to work with a website but may have questions before they order. So if the phone number is not available right off the bat then they really do not want your business and I take that as a signal. I should not have to look for their phone number and should not have to find ways to contact them.

This site is also quite extensive and you can find just about anything about batteries.

If you are trying to make a trip plan, the best site is hotwire.comI used it extensively when I was traveling. I am not travelling much now but for occasional trips I still use it. Most travel sites are a joke. I can beat their prices just about any time by going directly to the hotel or the airline. When nothwest airlines was around it was easy to do that. Now, with high priced Delta and American airlines, it is not quite so easy but you can still find many deals on your own.

In general, Hotwire is the only travel plan that is of any merit. All others are only rehashing the information from hotels and airlines and presenting to you in different formats and you can actually do better by yourself, going directly to the hotel, airlines or hotwire website. The worst ones are Priceline, Expedia and the new Trivago. A little effort on your part will beat these wesbsites hands down. These websites are simply rehashing and recasting the travel information and presenting it to the prospective and basically lazy or hurried customers out there. The information presented is so extensive so as to be not actionalble at all and even confusing and time consuming. 

The same is the case with tavel and vacation planning sites such as the various travel and vacation sites that have a membership system for vacation rental property system via a resort where you buy not a piece of property but just the right to use a propety one or two weeks a year and then you are offered exchange programs with other resorts. All of those are just flat scams. You will get an "imaginary" property use ownership but will have to pay maintenance costs and other fees. In return you get supposedly cheap travel accomodations. But that is a hoax. All resorts and vacation places already have vacation and tarvel plans and they beat the plans you buy hands down and when you are done with your vacation there will be no maintenance costs either to deal with. Basically, let me put it more effectively. Do you know the word "rehash"? Well, all the travel companies and the vacation travel companies are simpy rehashing the inforamtion available directly from the resorts, hotels and airlines, etc,. and most times you can do that yourself and save hundredds and thousands without any permanet obligations.

The inforamtion presented is so extensive that you can hardly use it. If you are trying to save money then call diretly to where you are going and get a better deal. You can get a good deal calling directly for a car rental, hotel or airlines. And if you are not looking to save money and are "independently wealty", why are you looking at the websites? Why don't you just call your travel agent and let her do all the details for you?

 I am not a great lucid writer. But that is not the objective. You need to look at the argument and not who is saying it or how.

RH

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