By Mario Toneguzzi
A recent trend of suppliers/manufacturers setting up their own online stores is not going over well with bricks and mortar retailers who now have additional competition in the marketplace.
With a diverse inventory and minimal overhead, this is allowing suppliers to offer their products at a lower cost.
Fred Pritchard, vice-president of Golda’s Kitchen Inc., in Mississauga, an online retailer of bakeware, cookware and cake decorating supplies, says some of the suppliers are aggressive about online sales and would have customers buy from them rather than the retailer.
“Those are the ones who are problematic suppliers. They also then typically want to orchestrate their policies around that ‘we’re going to sell on Amazon only, not you’ because they want the gravy of Amazon. They know that Amazon is a huge market and they won’t sell direct to Amazon as a vendor but they want to be the retailer on Amazon,” says Pritchard, adding that some suppliers are even opening their own physical stores.
“They now want the retail portion. So they explicitly exclude retailers from selling on Amazon or any other third-party marketplace platform and they pick up that work themselves because they’re greedy and they want to see extra profit. So they tell you, you can only sell on your website.”
Pritchard says Golda’s Kitchen is one of the longest established online retailers in Canada starting in 1999. It also has a bricks and mortar store in front of its warehouse.
The bottom line for many retailers is that it affects their sales and their bottom lines.
“When will that business dry up because the supplier has inundated the web with their product . . . It’s not about when that small retailer will lose that business. It’s not about if they will, it’s when. When will the consumer stop buying that product in their store because they can get it cheaper from the manufacturer?,” says Pritchard.
“My suggestion to the independent retailer is if you have a brand that’s intent on selling direct, get them out of your store as soon as possible and replace them with a brand that is going to respect the work you do, respect the effort you do educating consumers, talking up the product features, and working with customers either on your website or directly. And work with those types of suppliers. There’s enough suppliers out there who are not selling direct and you can fill your store with fabulous things and your consumers will be happy.”
John Franzky, one of the owners at Bow Cycle which has been in business 60 years in Calgary, says the trend has been a little hard to swallow since it first started as the retailer and the supplier are now both trying to sell to the same customer with two different means of operations.
“I’m supporting your brand. Paying my rent. And now I’ve got another competitor out there in the world wide web?,” says Franzky. “Obviously as a retailer I do have concerns about the web sales going out there, the Amazons and all of that."
“I’ve been supporting these guys for years and I understand everybody wants to grow their sales but I have felt the slap in the face from a handful of manufacturers and distributors for decisions they’ve made to go after the business themselves.”
But despite the increased competition, Franzky and other retailers feel there are still many consumers that like the look, smell and touch of bricks and mortar locations.
“The good bike shops are always going to have the smell of rubber. The Internet doesn’t have the smell of rubber. We’re definitely fearful of it. There’s no two ways about it. They’re taking market share,” he says.
With time and the Internet and ecommerce, agencies and distributors for clothing stores are becoming more and more obsolete because the retailer doesn’t need a middle-man any more. This is the first business being threatened, says Colette Hamon, owner of BraTopia, a retailer of lingerie and swimwear which opened January 2011 in Calgary.
“These brands have moved a lot of their sales inhouse. Some of these companies have not only eliminated the agency distributor, they have also opened their own ecommerce sites so that you the consumer are going to go to their website to not only look at the product but you could also buy it off of their website,” she says.
Mario Toneguzzi, based in Calgary has 37 years of experience as a daily newspaper writer, columnist and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, city and breaking news, and business. For 12 years as a business writer, his main beats were commercial and residential real estate, retail, small business and general economic news. He nows works on his own as a freelance writer and consultant in communications and media relations/training. Email: email@example.com.