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Ecommerce, Evil or Good Disguised As Evil

April 16, 2010

Recently, I recently read an excellent article in one of our trade magazines about ecommerce and how it is affecting the outdoor industry. The article interviewed retailers and manufacturers and some see it as the best thing since sliced bread. Like many early adaptors, they feel Etailing is the “be all end all” that is going to create a sea change in our industry. Others believe no good can come from Etailing. I have a more middle-of-the-road position.

 

I know I’ve lost sales to Etailers. Just this weekend, a customer came in asking if we carried a particular line and design. As it turned out not only did we carry the line, we had the exact chair they were interested in on display in our showroom. When I pointed it out to her, she and her husband made a beeline to sit in the chair. They weren’t easy to engage; didn’t ask price and “were in too much of a hurry” to look at swatches.  It was obvious they had found the furniture on the Internet and just wanted to sit in it before they purchased it. Since we have all had this happen to us, we have a bad taste about Etailers. They use our showrooms instead of having the overhead of a brick and mortar location.

 

But, I have also gotten some sales because of the Internet. Without direction from a flesh and blood sales assistant, some consumers get information overload after shopping on-line. They want someone to clear up the confusion; so, they come into my brick and mortar store to talk to a sales consultant. Typically, if they come in with an open mind like this, we can work with them and close the sale.

 

There are other ways the Internet can be a boon to retailers. For example, I like the Brown Jordan site a lot. It allows us to build a chair in front of a client in the exact frame and fabric color they want. The ability “to see it before you buy it” feature has been helpful to us in closing several sales.

 

But retailers get up in arms when scurrilous Etailers or manufacturers threaten their business. There were four things mentioned in the article that I consider threatening.

 

  1. Pricing. We all know that on any given day, there might be another brick and mortar retailer somewhere who will beat even our best price. But there is always someone on the Internet that will beat our prices. Maybe they buy in larger amounts than I do and get bigger quantity discounts. Maybe their overhead is lower than mine.  Whatever, the reason, they are just cheaper than me. Many manufacturers try to even the playing field by establishing Minimum Advertised Pricing guidelines. In my experience, these prices allow me a much smaller margin than I need to stay in business. Additionally, a MAP policy is only effective if properly policed. In the article, some manufacturers contends the best policing policy is to depend on retailers to “tell on” Etailers who are advertising prices below MAP. I’m sorry, if a manufacturer is really serious about MAP pricing, they should have someone on staff to check for violations all day every day. Otherwise, I think the manufacturer is only paying lip service to our concerns.
  2. Sales Taxes. I am required to collect sales taxes that can be anywhere from 8.75% to 9.25% in my trade area. Etailers don’t have to do this unless they have a physical presence where the goods are delivered. However, in Louisiana, the consumer is supposed to report all purchases they made that were not taxed. Then, they have to pay sales tax on those purchases along with their State Income Tax. How many Louisiana residents do you think do that? Of course, the alternative is for me to rebate the sales tax to the consumer on these sales. If I do, though, my margin is cut to the point where I am losing money on the sale. Where’s the MAP policy to cover that?
  3. Drop Shipping. I just don’t get why manufacturers would drop ship anything for an Etailer, at least not if they want to protect their brick and mortar distribution system. Drop shipping for an Internet retailer that Etailer is just another way to lower their overhead. Some vendors won’t drop ship at all. Some charge a percentage to drop ship. But, if you can believe it, there are still some manufacturers who think they can somehow justify drop shipping and do it at no extra charge to the dealer. When they do, they give the Etailer an unfair advantage and we shouldn’t stand for it.
  4. Manufacturers with their own Etail sites. Some manufacturers have opened their own Etail sites with the explanation that their selling prices are higher than the average brick and mortar outdoor specialist. Others say they try to direct the consumer to one of their dealers. Some sell over the Internet but share the sale with a dealer in the trade area where the consumers live. Some say that with so many failing retailers, the only way they can stay alive is to open their own Etail site. Let me say this about all of those reasons,  "If it quacks like a duck, walks like a duck . . . " Oh well, you don’t need me to finish that. There are so many things that are wrong about this I don’t’ know where to start. First of all, no vendor should undermine a retailer’s pricing strategy by publishing any sort of price on the Internet. Second, how does the vendor decide which retailer to share the profits with if there are several in the trade area? Finally, don’t vendors see that no matter how they justify it, some of their brick and mortar are going to see this as unfair competition and drop the line?!

 

Our industry is in dire health and I appreciate manufacturers need to find new ways to bring in sales. The problem is, since no one knows how successful Etailing will be, some manufacturers are playing fast and loose with their Internet policies.  I liken them to the person who has been dating someone for a long time and decides there might be someone better out there. So, without consulting their long time partner, they begin to date around thinking if they find someone better, they will break it off with their first partner. On the other hand, if they don’t, nothing will be lost because they still have their first partner to fall back on. However, if that partner finds out about the duplicity, there is a good chance the philanderer will end up alone (or beaten up with a four iron). When a manufacturer strings along their retailers to try new ways to distribute their products, they might end up going it alone, too (or beaten up with a cast aluminum chair). Think about it.

 

Yours in confused retailing, Bruce