On both a personal and business level, I’ve always supported giving “the local little guy” a go over the big players. The reasoning is twofold: if there are no alternatives to the big players available to keep price and quality competitive, the small players will disappear and that would be a really bad outcome. The second is that many times these small companies are better social citizens, providing more for Australians than especially global companies do. I encourage all readers to think about where you spend your hard-earned dollars. Let me explain with some industry examples.
What a waste
Like many of our customers, we generate multiple waste products that all have to be disposed of in a responsible manner, and we try to recycle as best we can. The waste industry is controlled by a handful of large companies, most of them being overseas owned.
We were recently approached by a young guy offering to pay (an admittedly not significant) 10 cents per litre for our waste oil. Our in-house servicing and rebuild functions mean that we generate a reasonable amount of waste oil that we have been getting picked up free of charge. This story is about what happened next.
Within a couple of hours of notifying our existing provider, our account manager and his manager (whom we’d never had the privilege of ever meeting) rocked up at my office to warn me of the perils of what we had done. Turns out, we weren’t the only business in the area that had changed over “as several of them have told us they hadn’t been paid yet”. I pointed out to them that neither had they.
Then they went down the path that readers of my newsletters will know fires me up: compliance. This is a common tactic used by established players setting up barriers to entry to their segment. If the only thing you can sell your product or service on is “compliance”, then what you are offering has no value and is of no benefit. “He doesn’t have the required approvals and if you get inspected you’ll be in trouble” – it was a scare tactic and as far as we can tell he does have the required approvals and processes, something that was easier to verify with him than it was with our prior provider.
I then suggested an area they could help us with is servicing and pump out of our separator systems, as we’re using one of their (bigger) competitors. And the reason I’d like an option (aside from being a significant cost) was that only days earlier all businesses in our industrial precinct had the pleasure of a second unannounced compliance inspection by Urban Utilities (UU) in 6 months. We were squeaky clean, except for 1 thing. According to UU’s records, our separators hadn’t been serviced for 2 years. We used to use a small provider, and that company was taken over by the large company 2 years ago, so we had no option but to transition across. It turns out we’ve been servicing our separators twice as frequently as technically required, which we could prove by both service dockets and invoices. This large company that many trust due to “compliance” hadn’t been lodging the reports, and when contacted came up with many excuses, none of which really matter. They had done the work properly, but the mountain of paperwork required takes longer than the actual work does, so suspect the tech or somewhere in the system there are “short cuts” taken. This rendered the argument about using big companies for “compliance” purposes somewhat moot.
The moral of the story is this: the large companies must be feeling a river of gold being challenged by a new entrant that has none of the buying power or benefits of scale that they do. In a final proof that we were on the right track, “unexplainably” the large company waste oil truck rocked up the next day (2-3 weeks early) to pump out any oils on site as a means of disrupting the new provider. As a semi-sweet outcome, the small company had already beaten them to it.
Beware the big boys
The next example relates to market power, in this case in the Earth moving equipment industry. Original Equipment Manufacturers (OEM’s) have always felt challenged by smaller, more nimble and less overhead intense alternative businesses like RD Williams. They use tactics like locking in servicing agreements and threats of voiding warranty, and now things like electronics locking others out too. Watch this space – Subaru has just been taken to court by the ACCC for not giving independent repairers like our customers access to technical information, software (parts information, log ins to machines, etc). This is in breach of the “Right to Repair” legislation which should soon apply also to at least the agriculture industry and probably extend to mining and construction (virtually the same machines are used in many cases).
As a smaller local company that lacks the benefit of customers “having to” come back to the OEM, RD Williams must prove ourselves in every interaction with our customers. We need to be easy to do business with, as well as provide a top-quality product at a value for money price, higher service levels (speed of supply etc), technical knowledge (from knowing what fits what), and have cost effective supply channels. The reason we sell parts is because the OEM doesn’t have it; charges too much for it; or it needs replacement (that is, wears out or fails in some way). We have the flexibility to source parts from places the “local” OEM’s can’t: from alternative and aftermarket manufacturers, from the OEM’s themselves overseas (or locally), and not least from the factories that supply the OEM factories or have developed products to compete quality/price wise. Using hydraulic parts as an example, there are maybe half a dozen manufacturers in the world for certain parts – these companies supply the hundreds of OEM’s, so by buying direct (and having a more efficient supply chain with less mouths to feed), we can provide great products at value for money prices.
In Australia, there have been maybe 10 or so long-term established new replacement/after market suppliers that have filled some of these niches and grown over time. In just the last couple of years, a “global” aftermarket company has gobbled up several of these companies. ITR/USCO have taken over several well-run local companies including Tilly’s, UKW, and Hiway Tractors (to an extent this is due to these companies not having family succession plans as the owners retire). Growth by acquisition is a common “big company” strategy that is seen as easier than achieving profitable organic growth. Of course it hasn’t taken long and ITR are now substituting the products that made these companies a success with ITR’s own products, and changing the business models that made these companies successful over the years. In addition to this, ITR have now absorbed the global manufacturer and sales business ITM. All these moves are obviously putting pressure on other manufacturers by reducing the available pie in Australia and overseas. Bigger isn’t always better, think of for instance school class sizes where attention and service levels as well as the fit of the product reduces the bigger the provider.
As proven time and again, when a company becomes market dominant enough, the prices will eventually be increased. It’s important that all the remaining alternative suppliers are supported to ensure you have the choices you want.
I mentioned in the introduction about being a good social citizen. All earth moving OEM’s are foreign owned as are many of the local distributors. Our company has always been proud to be 100% Australian owned and operated, paying our taxes in Australia, employing people in Australia, and re-investing all our profits in Australia. Spending money with these foreign companies instead means our wealth is going overseas.
The other factor in this is that Australian owned businesses are at a disadvantage compared to foreign owned ones. It is well known that Meta, IKEA and other companies minimise tax in Australia. It’s legal but questionable ethics to dodge local taxes and thereby not give back to our society. Australian companies can’t inflate transfer prices; charge internal licensing/IP and other fees; or use intercompany loan charges and the like to reduce the reported local profit (and thereby pay less tax here). Most people think that is wrong, but often don’t consider the bigger picture and still buy from these companies (often because they already lack other options). At the end of the day, it is taxes that pay for all our public services.
Australia has now lost most of our manufacturing and many companies across our society have been acquired by overseas businesses. I encourage you to join us in buying local and supporting true local companies, from the morning coffee and throughout each day.
Words from the wise
“Every purchase you make is a vote for the world you want to live in.” – Steve Russell.
“Bigger isn’t always better. Better is better.” – business coach Brad Giles emphasizing that striving for quality, systems, and improvement naturally yields sustainable success over mindless scaling.
“Small businesses are the backbone of our economy and the cornerstone of our communities.” – Barack Obama.
“Most new jobs won’t come from our biggest employers. They will come from our smallest. We’ve got to do everything we can to make entrepreneurial dreams a reality.” – Ross Perot.
As always, Onwards and Upwards!
Fred Carlsson
General Manager
