Manufacturers wrestle over online retailing
Chris Gigley -- Casual Living, September 1, 2007
Love it or hate it, online retailing has arrived in the casual furniture market, and manufacturers say it isn't going away.
They also agree that, right now, the industry is experiencing growing pains online. Product is appearing online at prices far lower than those in regular stores, and savvy consumers have learned to use the Web as a bargaining tool.
"Consumers aren't dumb," said Rory Rehmert, vice president of sales and marketing for Meadowcraft. "They'll walk into a store and say they can pay $100 online for something even if they're paying $120 with shipping. They don't mention the shipping and handling fees."
But Kent Higashi, president of Alu-Mont Furniture, says that's the way consumers have always been, and the Internet is just another means to help them find the very best deal. Deborah Dill, vice president of Anacara, recalls the mail-order businesses of the 1990s causing a similar stir.
"You used to be able to call and get certain branded product lines at 40 to 50 percent off and delivered to your door," she said. "Specialty stores were fighting against that because consumers were using stores as showrooms."
Manufacturers restructured their programs to offer retailers more exclusivity, and issues with mail order retailers went away. The Internet, Dill said, is simply the next challenge for manufacturers and their efforts to grow their distribution without weakening their existing customer base.
Not every manufacturer embraces online retailing. Lloyd/Flanders has a strict policy posted on its Web site that begins, "Lloyd/Flanders does not support or authorize soliciting sales of Lloyd/Flanders product via the Internet or catalogs."
"We feel strongly that the consumer should experience things firsthand and not buy online," said Lloyd/Flanders' Dale Campbell. "We believe that the people who invest the time, effort and money to show our products in a retail setting should have the best opportunity to sell those products."
Homecrest doesn't allow online dealers to sell its products, either. "But has it happened anyway?" asked Homecrest CEO John Sundet. "Yes. We do check out Web sites periodically, but we have no formal process to monitor the Web."
Sundet isn't alone. The Internet is so big and so open that trying to control it through a structured effort would take more time and money than most companies are willing to invest.
"It's a constant policing effort because we always find people breaking the rules," Campbell said. "We would have to have a staff of lawyers to do it ourselves, so we wait for retailers to call us. Luckily, they aren't shy about letting us know when there's a problem."
Other manufacturers have used fees and rules to stanch online sales.
"We have a policy that prevents the usage of pricing without the consent of Meadowcraft," Rehmert said. "And we have a drop-ship fee that's significant and makes it somewhat prohibitive to do business online."
Both Rehmert and Higashi said a few online retailers circumvent the drop-ship fee by having product shipped to a warehouse.
"Our fee probably leads people not to push our product as much over the Internet," Higashi said. "Over the last 12 months, I've had only three situations where I was made aware of the fact that a customer lost a sale to the Internet."
Dill, however, said the industry better find a way to accept online retailers. Anacara is one of several casual furniture companies that allow its products to be sold online, albeit within strict parameters.
"We haven't opened our line up to every Internet site who approaches us," Dill said. "We investigate the pricing and the product lines they carry to make sure they're offering fair prices. We research their service track record, looking at how they handle returns, order cancellations and other issues."
Anacara's due diligence can take up to a year and eliminates most candidates. Those that make it through are then tested with a limited product offering until they finally earn Dill's trust. Even then, she says online dealers can sell only a fraction of the Anacara product line.
"It's a more focused presentation based on expedited delivery," Dill said. "It's what I know we always have good stock on and won't interfere with our regular distribution to our specialty retailers. The last thing I want is a retailer calling us to ask why her customers can get something on the Web and not in her store."
Dill says the company's limited foray online has paid dividends, opening the company's distribution to places where its products aren't sold in stores.
"A lot of furniture is already sold online," Sundet said. "The outdoor furniture market will have to learn to live in an online world and maintain the channels we have. We don't have a choice, because the younger generations will be shopping online."
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