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Whither Reps? Whither Us?

March 5, 2009

Mardi Gras came and went last week here in New Orleans. The first weekend after that when the weather is good is usually a bell weather for our year. The weather for Mardi Gras was glorious. Warmish, sunny, everything we could want. But we were closed; so, that did us no good. When we reopened for business on Wednesday, of course, the weather started to get colder, cloudier, and rainy. By that weekend, it was winter again. This weekend it is supposed to be in the high 70’s or low 80’s and sunny. I’ll let you know how we do.

I don’t know about you, but some of my reps are being hit hard by the slowdown. I am beginning to lose reps, some who have been rep’ing for a short time and some who have been rep’ing for years to other industries or jobs. Between that and the number of outdoor specialty retailers who have closed recently, I have begun to wonder what this industry will look like when the recovery starts.

In his recent newsletter, Bew White of Summer Classics, predicted at least 20% of specialty outdoor retailers would close in the next year. So, to begin with, there will be a smaller pool of specialty retailers into which vendors can sell. The retailers who do survive will probably do so by carrying more of the lower end price points that they are used to selling. I have seen customers come in, price higher end lines, and then say they have to go home to think about it. I think what they really mean is they don’t want to spend that much right now and are going to look for less expensive furniture at the big boxes and warehouse clubs. They realize the quality isn’t as good, but they can’t justify a major expenditure with things as they are.

Second, even as the rep force grows smaller, vendors are beginning to cut back on their rep costs. Manufactures who used to supply their reps with consumer brochures, price lists, and catalogs are now charging their reps for these items or at least providing them in more limited quantities. In some cases, commissions are being cut. I think this will lead to a rethinking of how reps fit into the industry. Recently a rep told me they thought vendors would stop using independent reps; instead, they would start hiring company reps for less money (perhaps a small fixed salary and small commission). If there are fewer specialty retailers to call on, this might make sense.

Third, since higher end merchandise is selling less readily than the lower end stuff, there could be a shift in product offerings from major manufacturers. Winston, whose line has become more and more high end in recent years, has reintroduced four or five entry level priced designs in the past 30 days. Just this week, Suncoast announced a price reduction on some of their entry-level designs. That’s fine for manufacturers who actually make their own product. Importers will have a tougher time reconfiguring their catalogs just because they don’t control the development and manufacturing process.

So, I see fewer industry players, companies with smaller and perhaps more efficient staffs, and a larger demand for entry level prices. I don’t know if consumers will eventually get tired of buying entry level designs and go back to their old spending habits. Even if they do, it will take a while.  I do think they will want style, quality, comfort, and service. However, with fewer specialty stores to go to, they will probably settle for reduced service and quality.

With fewer specialty stores, manufacturers are going to have to start looking for different ways to distribute their products.They won’t easily get into big boxes and warehouse clubs because many of them are by bypassing our vendors and buying direct. Catalog houses such as Frontgate and brick and mortar stores with strong Internet presences such as Restoration Hardware are also going direct more often now. However, they may be more willing to buy from our mainstream vendors, particularly if these vendors are willing to do private branding.

Will there be more manufacturer branded retail stores? Perhaps. Summer Classics seems to be doing a good job in that area. It has been tried before, though, (Brown Jordan’s Elegant Outdoors) without success. To succeed, the store will have to have a wide variety of offerings, not just aluminum or teak or wrought iron, but all of those products. I am not sure there is any vendor out there right now with a broad enough offering to be able to fill a retail store with their products alone.  But, even if manufacturer branded retail stores are possible, that won’t happen soon. No one wants to open a new retail store in this economy; its enough to keep what you have going!

I would like to hear from manufacturers, reps, and other retailers about where you think the industry is headed. What do you think this industry will look like in five years? I look forward to sharing your thoughts with anyone who reads this blog.

 Yours in confused retailing, Bruce