What Elephant?

May 9, 2013
I should have guessed it when I got my first faint whiff of peanut breath. I had suspicions when the chair cushions in the room were all badly pancaked. The bales of hay everywhere finally tipped me off. There was an elephant in the room and it was manufacturers were going into retail.

The most recent entry into what is arguably the hardest way to make money in the world is Brown Jordan.  Last week they had the grand opening of their first retail store in the tony South Coast Collection in Costa Mesa, Ca. Steve Elton, Brown Jordan's Chief Brand Officer, has been quoted as saying, "We are excited to bring Brown Jordan furniture to such a unique and appealing venue. I think that our clients will be very pleased with the design-centric shopping experience that is offered at SOCO and the extraordinary pieces they will find in our flagship store. Brown Jordan exemplifies the casual elegance of the southern California lifestyle and our new hybrid showroom brings the brand closer to the community."  I never knew "hybrid showroom" meant retail store. Color me naive.

Apparently, Brown Jordan is worried their brand has lost it luster with the 30 to 45 year old demographics. The brand might resonate with their moms and grand-moms; just not with them. By opening a retail venue in a high end shopping and design center, B/J is betting they will increase brand recognition with these lost souls. This in turn will increase the size of the outdoor specialty pie and benefit all of us retailers. Me, I am skeptical because my market doesn’t have lot of 30 - 45 year olds who have the disposable income to purchase Brown Jordan.  I am also a little miffed that I have been supporting Brown Jordan for years with early buys, advertising programs, floor space, and training programs only to have them go into competition with me and my fellow retailers.

Of course, Brown Jordan isn't the first manufacturer to go into retail; Summer Classics has had it's own retail stores for years. Gloster has entered the fray, too. Nor is this B/J's first foray into retail. Not counting their Elegant Outdoor concept which wasn't wildly successful as I recall, they have been selling retail on their web site for over a year. What is causing vendors to take such high risks with their old distribution models. It's the elephant's wife. . . our industry is sick!

The list of retailers who won the Apollo Award and subsequently underwent bankruptcy or severe downsizing is surprisingly long. Vendors who had the manufacturing world by the tail are gone, too. Also, retail business owners are aging. In the next few years, lots of them are going to set up their retirement by closing their businesses and leasing or selling their buildings for a guaranteed retirement income. For those retailers who stick around, their business models will change and will not include hefty early buys manufacturers need to stay in business. In a word, vendors are scared and rightly so.

Yet, I wonder what the downside risk is when a manufacturer goes into retail. Most vendors don’t have the experience or mindset needed to address problems retailers face daily. Additionally, how many retailers does the vendor risk losing when they take a step like this? You can say, "We'll, Brown Jordan doesn't have a retail store in my area. This won't affect me." You  might be right.  But who is to say that the next Brown Jordan retail store won't be across the street for you or at least in your trade area? Or, consider the possibility that Brown Jordan now has an excuse to sell their entire catalog to retail customers on the Internet. If they do, their argument will be that their retail location should have the same rights to sell on the Internet as any other retailer as long as they follow B/J’s Internet guidelines. Might they not piggy back this on their corporate web site?

My dad used to tell me you have to be fish or fowl; you can't be both. in this case, vendors have to decide if they are going to depend on the retail distribution model that has served them well for years. Or are they are going to create a new way to reach the consumer and do away with us pesky retail specialists. Until we know for sure what they decide, everyone of us is taking a big risk when we go to market. Who said retail isn't fun?

Yours in confused retailing, Bruce