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Off the news of Uni-Select’s acquisition of the contracts and relationships of Automotive Information Management Inc., reported earlier this year, we discussed some of the implications of the deal. It was then characterized as part of Uni-Select’s on-going strategic initiative, designed to expand its network and increase drop-ship sales (delivery of products directly from manufacturers to customers). Uni-Select President and CEO Richard Roy said at the time: “This transaction is in line with our strategy of continuing to develop the U.S. market and becoming a consolidator to program distribution groups that have distinctive branding, while continuing to maintain and operate existing business relationships with member customers.” The AIM acquisition was on the heels of Uni-Select parting company with its program group partner of almost 20 years, the Automotive Distribution Network/Parts Plus.

According to some observers, those moves early in the year were just the first steps in a continuing strategic process that they believe could cause an imbalance in the marketplace and could put vendors and fellow distributors in difficult positions going forward.

According to a number of sources we have spoken with throughout the industry, around the time of the AIM acquisition and the Network departure, Uni-Select put an Enhanced Drop-Ship (EDS) program into the field across the U.S. that offered considerable discounts beyond current drop-ship programs they offered or other functional discounts. Drop-ship programs have been the bread-and-butter of Uni-Select for some time now and has been fundamental to how MAWDI, the base for its U.S. business, goes to market. The difference this time, though, is the pricing in the EDS program essentially offers WD-level pricing for jobbers regardless of their size. And, this EDS pricing on hundreds of product lines was reportedly put into the field with no prior knowledge of the vendors or suppliers who stand behind those product lines — putting those vendors in a precarious position with other trading partners.

Of course, the folks at Uni-Select have a different perspective.

Responding to an inquiry from us, the folks at Uni-Select said that prior discussions with vendors were pre-empted “within the context of a confidential ‘acquisition’ transaction and could therefore not be communicated to vendors beforehand.” And, since the program has Uni-Select taking on the financial weight and risk associated with the credit program, it may not have needed prior review by the suppliers involved. “To our way of thinking, this is exactly the function a WD should fill in the supply chain,” the statement said.

Additionally, Uni-Select takes issue with the proposition that the program essentially offers almost any sized jobber a WD-level price on many product lines. “Although discount levels offered improve on their present buying conditions, our objective here was to support the independent jobber by giving him a better opportunity to compete on a more level playing field,” the statement said. “Further, when we designed the EDS program, we benchmarked other programs from chains and buying groups that were commercially available to jobbers of like size on the open market.”

Regarding existing pricing structure, Uni-Select believes there may be some misunderstanding regarding EDS. “One must remember that Uni-Select is basically a publicly traded buying group, which is committed to growth and the support of the independent jobber, and that it is Uni-Select [that] is the vendor’s customer here. Uni-Select has simply decided to sell its jobbers at a certain discount level as it has always done and has, in no way, affected the vendor’s pricing structure,” the statement said.

Like it or not, this has become a significant back-channel discussion in the marketplace and something that obviously has fundamental affect on various levels of the distribution channel and relationships between various trading partners. For some, it tears at the fabric that already exists. For others, it is just another way to compete within the context of a capitalistic system.

How it plays out in the long run — as is usually the case and a good thing — the market will determine the final score.

Gary A. Molinaro
Editor/Publisher