When profit is taken out of the economic equation, nobody wins.
With the economy getting better, many people in the material handling business are looking forward to good times without having to change how they do business. Unfortunately, that means that one thing that was a big part of why the economy was in trouble a few years ago will still be done.
When "dot-coms" were doing well, they grew quickly because they offered prices that were too low to be real and kept expanding into markets they knew nothing about. They ran their business at a loss for years, telling investors that things would turn around once they had enough market share. This "lose a little on each deal but make up for it in volume" business plan eventually backfired on them, of course. One by one, the balloons burst, and the economy went down with them.
In the material handling business, this old way of doing business is still very common. Too many companies have tried to merge, which has led them into markets they know nothing about. Too many people have played the numbers game, moving money from one pocket to another to make themselves look good for one more quarter (this is called managing for stockholder value), and have completely forgotten about long-term planning.
Worst of all, too many companies have bought into the idea that they should give up profits to get a bigger share of the market, thinking that they will start making money again once the competition is gone. It's called "buying a job" when a bid leaves little or no room for profit. In theory, this has two good points. It gets you the job and makes your sales numbers look good, if not your profits. Even more important, it keeps some of your competitors from getting the job.
But let's look at what's wrong with it. If you don't make money, you can't put money into research and development, new equipment, etc. All of your growth is on paper, and it will go away once you run out of money to buy jobs.
With low profit margins, you don't have the money or the desire to help the customer after the sale. The result is an unhappy customer, which is never good for your business in the long run.
Lastly, let's say your plan to underbid the competition works and your closest competitor goes out of business. What goes on? Someone buys his assets for 25 cents on the dollar and starts a new business. Since he only put in a small amount of money at first, he can undercut your prices. You haven't gotten rid of competition; instead, you have made it worse.
Making money is not a bad thing. When profit is taken out of the economic equation, no one wins, least of all the customer. I'm not saying we shouldn't try to find ways to cut costs and keep prices low while still making a fair amount of money. Customers do benefit from lower prices, but the economy as a whole and the material handling industry in particular will be much healthier when we all admit that we want our fair share. If a 3% return is good enough for you, I suggest you buy a government bond. This is safer.
