Referral Companies Posing as Businesses

Miscellaneous and Personal Stuff I Must Share
1

So I needed a replacement windshield for my car. I looked around and got some quotes from some well-rated local companies. The lowest quote of these companies was $235 plus tax, from a company called - let’s say - “Joe Blow’s Glass Repair”. I also found an online .com company claiming to be a nationwide glass repair company, and their quote was $195 plus tax. I couldn’t find any reviews for their work other than on their website, so I was a bit nervous, but decided that the price differential was worth the risk, so I signed up for it.

But here’s the thing. While I’m on the phone with the guy, and we’re discussing that I’ll get a call from their local service person to schedule the actual visit, he mentions that “in your area our local shop is known as Joe Blow’s Glass Repair, so when you get contacted, that’s who will be contacting you.” And indeed, that’s who contacted me and that’s who showed up to replace the windshield.

So it seems to me that this online nationwide company is just a company that has deals with various local glass repair shops across the country, and they don’t actually have any shops anywhere. Sort of like AAA and their towing services. But they deliberately try to give the impression that they’re an actual company.

But it worked for me. I got a good local company to do the work at $40 cheaper than their normal prices (and cheaper than anything else I could find), and as a result of going through the online company I’m also warranteed at any of their affiliates nationwide.

I’m surprised that the local people can give that level of discount, though.

I once had a similar experience when I was selling a junked car. I got a surprisingly high bid from an online junkyard, which turned out to be fronting for the local junkyard whose truck came buy to pick it up.

Worth being aware of.

[I’m not sure the thread title is technically accurate, though. I don’t know if the online company is being paid a referral fee by the local company, or if they take the money and turn around and pay some of it to the local people they’ve hired. In the case of the junkyards, it was clearly the online people just acting as intermediaries for the local people, though.]

2

As someone who does accounting for a lot of small businesses in the contractor/handyman/repair fields, one of the things I’ve learned is that these guys are mostly worthless when it comes to administrative work like estimates, billing, collections and customer service. But they are generally amazing at doing the work they specialize in. If you need a windshield, Joe Blow is your man

So as much as you might think of these referral companies as not “an actual company” they’re filling an extremely valuable niche, both for the consumer and the service provider. Even when the service provider gets less money per job, he’s reduced his admin workload enough that many consider it worthwhile. You also have the advantage that most referral services have checked for things like business/contractor licenses, bonding/insurance, etc. Of course, buyer beware and all of that - you’d want to make sure you know exactly what is happening.

3

This article from The New York Times is about such companies, which the article calls “lead generators”. The lead generator (which is basically a call center operation) gives someone who needs a locksmith a lowball estimate. But when the local locksmith shows up, they demand more money that the estimate was for, as much as five or ten times the amount.

4

We see a lot of this in the tourism trade. Sometimes it is a virtual front office for small tour operators and the tour operator doesn’t have another way to book directly. But for some it does cannibalize the leads the company could have generated on its own and possibly booked at a higher rate.

Visitors arriving via cruise ship may have booked with some online company boasting cheap shore excursions with an online form and/or 1-800 number for booking. But all the actual work on the ground is being done by a local company for boat charters, island tours and such.

And sometimes the booking agent is making more per head than the actual tour operator. The short excursion departments of cruise lines are notorious for taking a large piece of the pie.

5

I don’t think that’s a lot different from regular subcontracting. If I call Sears to repair my home appliances here in St. Louis, the repairman is the same one who shows up when I call A&E Electronics. I’m not sure who works for who.

6

A&E factory service is a subsidiary of Sears. This has nothing to do with subcontracting.

7

I don’t think this was the same type of operation. For one thing, I paid upfront to the online outfit, and didn’t pay anything at all to the guy who showed up. For another, the local business is clearly a legitimate business, although they charge less when you book them through the online outfit.

FWIW, the name of the online place is AutoGlassOnly.com.

8

This sounds like the same business model as Orbitz.com and other hotel booking sites. The hotel gets less for a room than if it were booked directly, but they do get some income for a room that otherwise would be empty.

Joe’s Glass gets enough of the cut to pay for their materials and time, and a little extra. If they get enough leads, they can manage a profit. If not, it brings in income and the hope is that the next time you need glasswork, you’ll go directly to them.

9

[quote=“dracoi, post:2, topic:762595”]

As someone who does accounting for a lot of small businesses in the contractor/handyman/repair fields, one of the things I’ve learned is that these guys are mostly worthless when it comes to administrative work like estimates, billing, collections and customer service. But they are generally amazing at doing the work they specialize in. If you need a windshield, Joe Blow is your man

QUOTE]

Exactly this. It gets even worse when a ‘trusted’ employee or family member takes advantage of the situation and starts embezzling.

10

I’m pretty sure any florist I’ve dealt with online follows this business model as well.
1-800 flowers just takes your order and passes it on to the nearest local florist, after taking their cut.