DirectBuy

DirectBuy
Private
Founded Merrillville, Indiana United States, (1971)
Headquarters Merrillville, Indiana United States
Key people

James L. Gagan, Founder
Mike Bornhorst, President

products = Home furnishings, home improvement, entertainment and outdoor, flooring, and accessories
Website directbuy.com
DirectBuy showroom, Farmington, Michigan

DirectBuy is a membership buying service headquartered in Merrillville, Indiana.[1] It claims that it is the largest franchiser of members-only consumer buying centers in North America.[2] Members pay a significant fee, which then entitles them to buy merchandise "directly from the manufacturer and its authorized suppliers".

Product categories include home furnishings, home improvement, entertainment & outdoor, flooring, and accessories.[3]

History

DirectBuy was founded in 1971 in Merrillville, Indiana[1] by James L. Gagan, and the first Canadian franchise was founded in 1996. The company was incorporated as DirectBuy in 2004. United Consumers Club (UCC) remained the holding company for DirectBuy until December 19, 2007, when DirectBuy was acquired by Trivest, a private equity firm, and Allied Capital Corporation (stock symbol: ALD) with $83 million to support the buyout.[2][4]

Workforce Reduction

In November 2015, DirectBuy laid off nearly 70 corporate employees due to a workforce reduction effort designed to augment cash flow. Fortunately for the Northwest Indiana region, many employees were offered opportunities to return for interviews in call center operations which had been rapidly expanding due to the continued efforts to strategically downsize retail locations.

Bankruptcy

On November 1, 2016, Direct Buy filed for Chapter 11 bankruptcy.[5]

Membership terms

Initial membership costs vary by franchise location and have two or three year terms. In 2007, Consumer Reports reported that memberships at some DirectBuy locations in the New York area ranged from $4,600 to $4,990 for a three-year membership and then $190 a year for the next seven years.[6][7] In 2009, the Star Tribune reported that enrollment fees are $4,700 and then $99 a year after 30 months.[8] The customer must decide at the time of their Open House visit, before leaving the showroom, whether to join DirectBuy after receiving a presentation of services. DirectBuy states that a customer may be shown confidential pricing during the Open House, and its "policy is in place out of respect for our members, manufacturers and the retail industry. It also prevents consumers from asking traditional retailers to match DirectBuy prices."[9] Some franchises are offering 30-day trials to certain potential clients,[8][10] valid for up to $1,000 in purchases.[11]

Awards and Partnerships

In 2006, DirectBuy was ranked #42 on the Franchise 50, a list of the top 50 franchises as rated by their owners, published by Franchise Business Review and ranked #1 franchise in the Miscellaneous Retail Business category in Entrepreneur Magazine.[12]

In October 2007, DirectBuy of Boston South was recognized for 20 years of participation with the Better Business Bureau and 9 consecutive years without a customer complaint.[13]

In 2007 and 2008 DirectBuy of Ottawa received Consumers' Choice Award for Business Excellence in the category of "Blinds and Shades".[14] In 2008 DirectBuy locations in Vancouver and Coquitlam won Consumers' Choice Award for Business Excellence in the category of "Kitchen design and Bathroom design".[15]

Criticism

Consumer Reports

Consumer Reports' 2007 review is that "the lack of price transparency makes it hard to evaluate whether you’ll save by joining DirectBuy. But even if you were to save 25 percent on purchases after joining, you’d need to spend more than $20,000 just to recoup your membership fee. DirectBuy might save you money if you’re furnishing a house from scratch or doing a major renovation" but cautioned its readers that "since you can’t shop around beforehand, you’ll be joining blind." [16] Prices for items such as electronics are higher than available from online retailers; the "deep discounts" were found on flooring and high-end furniture. Customers cannot return items, cancel orders, or terminate their membership. An 8% handling fee, shipping fees, and tax are added to the cost of items purchased. Some complain of poor customer service and long waits for purchased goods. "Since DirectBuy outlets are franchises, service varies by location. Most outlets have a good record with the Better Business Bureau, though some have a poor one or have been suspended from the BBB." [6][7]

West Virginia lawsuit

West Virginia Attorney General Darrell McGraw filed suit January 26, 2011, in Kanawha County Circuit Court against DirectBuy Inc., its local franchise and the company's president alleging it engages in unlawful, coercive, deceptive, and high-pressure sales practices. The suit also alleges that DirectBuy pressures consumers with its 'now or never' tactic. DirectBuy warns consumers that anyone who leaves the premises without joining the club will be banned from joining forever. This threat is false, misleading, and unconscionable according to the Attorney General.[17][18][19]

Cease and desist controversy

Attorneys for DirectBuy issued a cease and desist letter to consumer blog infomercialscams.com for "unwarranted and defamatory attacks" posted about DirectBuy by visitors to the blog and asked that the comments be immediately removed.[20][21] The letter itself was forbidden to be posted online by the DirectBuy attorney, citing ownership of the copyright to the letter as justification. Public Citizen claims that this is "a common method to counter that problem by scaring recipients into keeping quiet", and that the "letter is a good example of the many meritless threats that companies hurl at their online critics in an effort to silence dissent "[22] and subsequently posted the cease and desist letter on their website along with their response to the letter.[21][23][24]

References

  1. 1 2 "About DirectBuy". DirectBuy. Retrieved 2007-10-16.
  2. 1 2 "Trivest Partners Acquires DirectBuy, Inc. Represents First Investment for Trivest Fund IV" (Press release). Miami, Florida: Trivest Partners. 19 December 2007.
  3. ↑ "Buy DirectBuy Products Direct From the Source". DirectBuy. Retrieved 2 January 2012.
  4. ↑ "Allied Capital Invests $83 Million in Largest U.S. Franchisor of Consumer Buying Centers" (Press release). Allied Capital Corporation. 12 December 2007. Retrieved 2 January 2012.
  5. ↑ http://www.reuters.com/article/directbuy-bankruptcy-idUSL1N1D22CB
  6. 1 2 Fichera, Chris. "With DirectBuy, it will cost you a lot to save". Consumer Reports. Retrieved 2007-10-16.
  7. 1 2 Cole, Kirsten (2006-05-16). "Big Membership Fee Doesn't Always Mean Big Savings". WCBS-TV. Archived from the original on 2007-10-11. Retrieved 2007-10-16.
  8. 1 2 Ewoldt, John (22 July 2009). "DirectBuy not up front about cost of membership". Retrieved 2 January 2013.
  9. ↑ "DirectBuy FAQs". DirectBuy. Retrieved 2008-07-10.
  10. ↑ "Briefly In Business: DirectBuy unveils new membership terms". The Burbank Leader. 16 September 2009. Retrieved 2 January 2013.
  11. ↑ "DirectBuy Free Membership". DirectBuy. Archived from the original on August 22, 2009. Retrieved 2009-09-13.
  12. ↑ "DirectBuy Inc. Franchise Information". Entrepreneur Media, Inc.
  13. ↑ "Two Decades of Doing Right by Customers". PR WorkZone. 20 October 2007.
  14. ↑ "Consumers' Choice Award latest distinction earned by DirectBuy of Ottawa". The Ottawa Citizen. 28 June 2007. Retrieved 2 January 2013.
  15. ↑ Dubin, Steve (30 July 2008). "Directbuy Locations in Vancouver and Coquitlam Win Consumer's Choice Award for Kitchen and Bathroom Design". Vancouver, Coquitlam, Victoria, and Okanagan, BC. Archived from the original on 22 July 2012. Retrieved 7 November 2016.
  16. ↑ "With DirectBuy, it will cost you a lot to save". ConsumerReports.com. 2007-09-13. Retrieved 2010-03-16.
  17. ↑ "AG's Office Files Lawsuit Against DirectBuy Inc.". WTRF-TV (West Virginia Media Holdings, LLC). 26 January 2011. Archived from the original on 18 July 2011.
  18. ↑ "Attorney General McGraw Sues DirectBuy, Inc. and Local Franchise Over Pressuring and Unfair Sales Techniques" (Press release). Charleston, West Virginia: State of West Virginia, Office of the Attorney General. 26 January 2011.
  19. ↑ Dickerson, Chris (16 January 2011). "McGraw's office files suit against DirectBuy". The West Virginia Record.
  20. ↑ Leonard, Justin (2007-10-05). "Direct Buy Attorney THREAT Letter". Infomercialblog.com. Retrieved 2007-10-16.
  21. 1 2 "DirectBuy attorney cease and desist letter as published by Public Citizen" (PDF). Retrieved 2007-10-16.
  22. ↑ Beck, Greg (2007-10-05). "Don't Post This Cease-and-Desist Letter, Or Else". Public Citizen. Retrieved 2007-10-16.
  23. ↑ "Public Citizen response to DirectBuy cease and desist letter" (PDF). Retrieved 2007-10-16.
  24. ↑ Popken, Ben (2007-10-09). "Donning Copyright Cloak, DirectBuy Forbids Posting Of Cease And Desist Letter Sent To Consumer Opinion Site". Consumerist (blog). Retrieved 2007-10-16.

External links

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