Two Landlords Walk into a Plumbing Merchant
The first spends half an hour utilising the latest sales, psychological, and interrogation techniques to get the branch manager down to the best possible price.
The second then gets to the till. “I’m with LNPG” he says and flashes his membership card. And like magic, the price comes down well below what the first landlord could have imagined.
But it’s not magic – it’s the power of contract pricing.
Retail Pricing
When you walk into a retail outlet (like a DIY store) you pay the top price.
Even if you are offered discounts, it remains by far the most expensive way to buy anything.
To make things worse, many products offered by retailers are of a lower quality than trade products. In fact, some products are manufactured exclusively for retailers, using lower quality parts to reduce cost and allow the retailer to compete on price.
These items are more prone to failure, may be harder to source parts for should they fail, and generally speaking, are not fit for the demands of the rental market.
Trade Pricing
Trade pricing is popular in the building materials market and tends to be much more competitive than retail pricing. As tradespeople are likely to buy the same products regularly, and may often buy in bulk, they are able to get better rates.
Product quality is usually a lot better for the trade as well. The last thing a tradesperson wants is to head back to a job to fix something they've fitted, so it pays to know the difference between the good, the bad, and the ugly.
So, all in all, trade pricing is pretty good, but even the best negotiators among the trade can't compete with contract pricing.
Contract Pricing
When central government, major housing associations, and national housebuilders need to upgrade their housing stock, they use contract pricing.
This means skipping the distributor and going straight to the source: negotiating the best prices possible directly with manufacturers. As you might imagine, this also leads to a lot of private meetings and terms agreed over periods of many years, to keep the little guys out.
Like we said, it’s not magic. It’s not even new; this has been happening for decades. It's just that things went a lot smoother without the rest of us knowing about it.
That's why in January 2011, LNPG came along and unlocked contract pricing for private landlords too.
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