Snap On Trucks

[The Critic]

I recently started doing business with a Snap-On truck who is somewhat new to their route. For those of you who are familiar with their business model, I am curious about the following:

1) If their business model is reliant on interest/debt as a source of revenue, why does the driver offer a substantial discount when purchasing with cash?

2) Why is the driver more inclined to discount a tool that he has in-stock? I thought the truck driver has to order all inventory from Snap-On.

 

[JHZR2]

Good questions. Is the cash deal beyond sales tax and cc processing fees levels?

Id suspect that the SO driver also has to incur substantial debt, so paying for tools he has in stock would burn down that debt load. I would assume that they won’t order something without OPM (other people’s’ money)?

 

[The Critic]

Good questions. Is the cash deal beyond sales tax and cc processing fees levels?

The discount is well beyond CC fees and sales tax.

 

[SwampSurvivor]

Snapon is run like a MLM. The driver of the truck has to purchase that inventory. Likely unless he or she is already independently wealthy, there's some pretty substantial carrying costs on that inventory. Every day it's not sold is another day it's racking up interest and making less money.

 

[bunnspecial]

No first hand experience, but I wonder what the rate of default is for tools bought on credit.

When paying cash or paying upfront/outright for something, there's zero risk of that so I could see that factoring in.

 

[DuckRyder]

I’ve been told by both Mac and Snap on that there is a 100% charge back even on a formal account (ie a non-truck account) . In the current atmosphere I would be doing all I could to avoid selling on any sort of credit if I was a truck owner (assuming what I was told was true.)

 

[JTK]

I always assumed it was more of a consignment thing for their inventory. Sounds like a horrible way to make a living today.

 

[Kira]

There must be at least a few layers to this onion.
Maybe the discounted cash sales alluded to TEND to be basic tools more people buy and are offered as loss leaders TO ESTABLISH RELATIONSHIPS.

"Oh, you want a 36" long, 3/8" extension? I got one here...and that common screwdriver....all on a coffee break for a price that'll make you remember me when you want that $3,000 analyzer".

I think JYK is on to something.
THE queerest thing about SO trucks in my neck of the woods is that I've NEVER seen the same "proprietor's name" on the side of the truck twice. How inefficiently do these poor guys circulate?

Also, how do they "sell"? They can't go into a car dealership and pitch to the mechanics. I'd hand out half-sheet flyers.

 

[Wolf359]

I recently started doing business with a Snap-On truck who is somewhat new to their route. For those of you who are familiar with their business model, I am curious about the following:

1) If their business model is reliant on interest/debt as a source of revenue, why does the driver offer a substantial discount when purchasing with cash?

2) Why is the driver more inclined to discount a tool that he has in-stock? I thought the truck driver has to order all inventory from Snap-On.

I believe the debt is carried on the driver's own books. I knew a mechanic that used to do a truck and he said when he sold the business he sold it with the debt that hadn't been collected. I'm guessing they expect a certain percentage never to pay off that debt. I think what happens is that mechanics who work at a particular shop end up disappearing and then never pay off their debt. If you look at the franchise setup for the Snap On truck, it appears that the driver pays about 2/3 of the list price for the tools. Probably more about cash flow, same way a dealer discounts a car sitting on the lot more than a custom order, they just want to move the merchandise. A sale today is worth more than a sale a week from now.

I'm surprised you don't just buy a ton of Williams tools.

 

[The Critic]

Snapon is run like a MLM. The driver of the truck has to purchase that inventory. Likely unless he or she is already independently wealthy, there's some pretty substantial carrying costs on that inventory. Every day it's not sold is another day it's racking up interest and making less money.

No first hand experience, but I wonder what the rate of default is for tools bought on credit.

When paying cash or paying upfront/outright for something, there's zero risk of that so I could see that factoring in.

The cash discount is fairly substantial. I cannot imagine the "holding costs" being this significant. It is probably a combination of courtesy and perhaps the normal retail price has a "finance fee" included that is now being taken out of the equation.

Also, how do they "sell"? They can't go into a car dealership and pitch to the mechanics. I'd hand out half-sheet flyers.

Snap-On pretty much sells itself.

 

[The Critic]

I'm surprised you don't just buy a ton of Williams tools.

Most of my tools are Gearwrench, Tekton and various Taiwan/Chinese brands. But I do own some Snap-On ratchets, torque wrenches and some of their specialty tools.

 

[wpod]

I recently started doing business with a Snap-On truck who is somewhat new to their route. For those of you who are familiar with their business model, I am curious about the following:

1) If their business model is reliant on interest/debt as a source of revenue, why does the driver offer a substantial discount when purchasing with cash?

2) Why is the driver more inclined to discount a tool that he has in-stock? I thought the truck driver has to order all inventory from Snap-On.

Ask the Snap on guy.

 

[Wolf359]

The cash discount is fairly substantial. I cannot imagine the "holding costs" being this significant. It is probably a combination of courtesy and perhaps the normal retail price has a "finance fee" included that is now being taken out of the equation.

Snap-On pretty much sells itself.

How much of a discount are they offering? The initial costs of a franchise includes about 100k-120k just for inventory so they have about 150k-180k worth of tools on the truck in addition to whatever else they might want to add to inventory.

 

[Job]

I can’t imagine a truck owner giving out credit to basically strangers. Maybe they do, sounds a bit crazy to me. If he sells on credit maybe the sale goes through snap on and he has to charge the higher price. His tool cost is repaid by the company with a commission, maybe. A cash sale he is in charge of the discount because he then pays snap on his price for the sold item. If he makes $5 on a sale, it’s better than zero dollars. A credit sale has to have some kind of sign up process with recourse, they can’t just hand credit to anyone looking in the truck wanting tools on credit..

 

[NYEngineer]

If I remember right, the busier and better the SO guy's route is, the more tools he purchases and gets a better price from Snap on. Thus, he can afford to deal for cash. When I was a regular Snap On customer, my guy on Long Island was one of the busiest in the country. Turnover on his truck was unbelievable. He was always willing to deal.
I can't remember exactly when this was, sometime in the 90's, a bunch of Snap On guys tried suing Snap On because their routes were not as busy as others and they couldn't get the same pricing. They lost their case and lost their routes because it used to be (Don't know if it still is) you signed a contract saying you would not sue Snap On when becoming a dealer.
When I was young and starting out, I had a truck account which was an agreement between me and the SO guy. I also remember when I wanted to purchase my first big box that was like six grand, I had to apply for credit with Snap On. That was separate from my truck account so I had to pay on both every week to stay current.

 

[Wolf359]

I can’t imagine a truck owner giving out credit to basically strangers. Maybe they do, sounds a bit crazy to me. If he sells on credit maybe the sale goes through snap on and he has to charge the higher price. His tool cost is repaid by the company with a commission, maybe. A cash sale he is in charge of the discount because he then pays snap on his price for the sold item. If he makes $5 on a sale, it’s better than zero dollars. A credit sale has to have some kind of sign up process with recourse, they can’t just hand credit to anyone looking in the truck wanting tools on credit..

I believe they have to pay for the inventory on the truck, so no commission. If you look up the franchise information, tool cost is about 2/3 the list price so I guess they could discount up to 1/3 to just get out of an item that doesn't sell without losing money although they already lost money by carrying something that doesn't turn over.

 

[2EHA]

white and red truck shows up

i hand over my first born baby as third payment for my toolbox

white and red truck leaves

 

[Job]

I believe they have to pay for the inventory on the truck, so no commission. If you look up the franchise information, tool cost is about 2/3 the list price so I guess they could discount up to 1/3 to just get out of an item that doesn't sell without losing money although they already lost money by carrying something that doesn't turn over.

I don’t know, but the example of 6000 going through snap on credit makes sense. I imagine they would give the truck back the tools bought on credit, or reimburse the cost, plus there would have to be some kind of pay to the truck owner for making the sale, like commission. Otherwise he works for free. It also looks like the truck owner can give his own credit, it would have to be according to his comfort zone and knowledge of the people wanting credit. Big risk factor there.

 

[Job]

So we regular people may be able to buy snap on tools for 25% off or something if we find a truck?

 

[Wolf359]

I don’t know, but the example of 6000 going through snap on credit makes sense. I imagine they would give the truck back the tools bought on credit, or reimburse the cost, plus there would have to be some kind of pay to the truck owner for making the sale, like commission. Otherwise he works for free. It also looks like the truck owner can give his own credit, it would have to be according to his comfort zone and knowledge of the people wanting credit. Big risk factor there.

Snap on is a franchise. The truck owner owns the inventory on the truck. Instead of just collecting cash, he's just running the sale through a credit card. Once the owner sells the inventory in stock, he'd just order more inventory from Snap on. His "commission" is just the difference between his cost and the sale price. I suppose the owner of the truck/franchise could sell at a 25% discount as they pay 2/3 of list price for their inventory. They do have fixed cost though like the monthly truck fees and other overhead so I don't think they could really do that often unless it's some big ticket item like that 6k sale.