How online retailer buyers can kill you
This isn’t intended to strike fear in the hearts of kindred but I’ve been reminded of an increasing trend which suggests I should mention this again. This applies to those of you who are selling wholesale or want to sell wholesale. I’m not referring to those of you who sell consumer direct over the internet.
The issue? Retailers are getting clobbered over internet sales. They think it’s your fault -and in many respects they’re right. Knowing why they are right can make a dramatic impact on your sales and help you acquire new retail accounts.
Today more than ever, a retailer does not want to buy from you if you cannot enforce your retail price points. There is no good reason they will pay top dollar for your stuff if you’re not policing other buyers who are discounting your products on the internet. As the Financial Times said last week:
[...]the rise of internet shopping threatens to turn stores into glorified product showrooms where consumers view goods before ordering them more cheaply and conveniently online.
A fifth of all internet purchases now involve prior in-store research [and] that online-only retailers are picking up “significant sales” from consumers who browse goods in shops, then order from cheaper internet sites.
Now I know you’re hungry but you don’t want to take orders from just anyone. I know you can’t afford to exclude online retailers but they must prove they are enforcing price points of their existing lines (ignore this and this earlier advice to your peril). Even if selling online, you must limit their territories. For example, they should only be allowed to sell from their own sites. Not Amazon, not eBay, not Half.com or whatever. Only their own sites. This verbiage must be included in your terms of sale contract. This way if your stuff should end up on eBay or whatever, you can have it removed more easily.
Some of you think you have to sell to whomever wants to buy. This is a fallacy. Legally, you can sell or not sell to anyone you like (or don’t like). According to a 2007 Supreme Court decision, you can stop selling to someone just because they aren’t enforcing your price points. Legally, you can stipulate minimum retail pricing.
I stumbled across an unrelated company this weekend whose pricing boundaries are so porous that there is little incentive to pay full price. The (software) product is $60 but other parties are selling it on Amazon for $35. Worse, the company has understood the internet purchasing mechanism so poorly that multiple downloads of their product are available free on piracy sites. In short, there is no incentive for a retailer to buy it wholesale from its producer. So maybe in the beginning the software manufacturer thought they couldn’t turn down the internet retail buyers but with their policies so liberal, no other retailers want to re-sell it now because consumers can get it free or half price on the internet. You don’t want this to happen to you. I’m not saying it’s easy but there are strategies one can use to enforce the value of their product.
But back to the Supreme Court decision; one reason it was overturned was that more uniform pricing could lead to better customer service and amenities if pricing was more or less uniform. Even four years ago, the Court recognized that consumers today are often using retail stores as places to try on clothes but they go to the cheapest place they can find online to buy it. Meaning, the brick and mortar store is stuck with shop worn goods for a sale that someone else gets.
A member in our forum says this is why she got out of the bridal business. She says she went into bridal retail with rose colored glasses. She thought if she provided superior service, she’d capture the sale. But she said, “the majority of the time, loyalty is thrown completely out the door!” She said that in order to survive, she
removed the designer info from the dresses, I did not allow pictures, I instructed my consultants to not disclose the designer info, style # or size until purchase was made… It was THEN that I actually started doing business! I know that it sounds extreme but it was the only way for my business to survive!
It’s really not about the amount of competition out there, competition is fine as long as everyone is playing on a leveled playing field. Unfortunately, the operational cost of online store is a small fraction of a brick and mortar store. Financially, it makes sense to open a online store but if every bridal store was an online store, where would the brides go to try on dresses? They certainly wouldn’t order it online without trying it on first.
Summary: None of this is anything that hasn’t been published on this site previously, I just thought it could bear another airing since it’s been in the news so much of late and with so much content on this site, it’s hard to find stuff.