Like it or not, the world wide web is changing
the face of retail, especially in niche markets. In Part 1 we
take a look at who will gain, some things to watch out for and
what to expect in the future. Here also is a cautionary tale
based upon my own experience in a business with changing modes
of distribution.
These are strange and interesting days in
all of retail but first, let me tell you my story:
In the 1980's I found myself running a small
family business. It was a very small business indeed, at its
peak never employing more than 7 people. We sold rented and serviced
office machines. You know, small copiers, fax machines, printers,
business calculators, typewriters, word processors and the like.
For many years small shops like ours thrived.
We bought our goods from wholesale distributors who allowed us
to buy in small quantities. Across the street from us was a stationary
store. They sold things like paper, filing supplies, pencils,
pens and other office consumables. We stuck to the hard goods
and filled our niche nicely.
In the latter part of the 80's a sea change
began to take place in our business. Very large companies were
looking for retail industries with inefficient and out-moded
forms of distribution. The idea was to combine various related
businesses into "superstores", buy direct from manufacturers
in large quantities and at low prices, passing on a lot of the
savings to the customer. Our industry was a perfect target for
this strategy and soon chains such as Staples, Office Depot,
Office Max and others began to appear. Selling office supplies,
machines, furniture and more, often at retail prices lower than
we could buy wholesale, these stores put the squeeze on us.
The new chain stores could not compete with
our product knowledge and outstanding warranty service. We also
added further value by working even harder to please the customer.
Still the competition was relentless and our need to buy from
distributors, adding a layer between us and the manufacturer,
kept our prices substantially higher. Sales were suffering and
soon the rental and service departments were slipping too.
In an effort to help the small dealers, some
of the manufacturers and distributors began to sell products
bearing different model names to the dealers and the chains.
The idea was that we would not have to compete directly and for
warranty purposes the chain merchandise would be distinguishable
from the dealer products. An office machine bought from a chain
with no onsite service department would have to be sent to a
repair depot, often far away, at great inconvenience and expense
if it needed warranty work. On the other hand we were able to
take care of our customer's warranty needs right in our shop
or even in their office, with parts supplied by the manufacturers.
We also began cutting our retail margins substantially
in an effort to prop up other parts of our business. Merchandise
was being sold at almost no profit so we could move product at
just a little higher prices than the chains. We again redoubled
our efforts in the customer service area.
Did any of this work? Only in the short term.
Many of our long time customers tried to stay with us. Many said
they would be willing to pay a little more for good customer
service. Many said they valued our warranty policies, and the
way we stood behind our products. This is what they said, but
our experience was that folks don't put nearly the value on this
kind of stuff that they say they do. The bottom line always was
that they wanted to pay the lowest possible price. Often they
would come into our shop for a demo and then go buy at the chain
store and pay a little less.
The much talked about "personal touch"
was no match for the overpowering lure of saving money. Fortunately
we were able to transition our business away from retail and
into other areas and we continued on for a number of years outlasting
all but one of the seven shops of our kind in the area, but a
powerful lesson had been impressed upon me. Traditional retail
distribution channels always run a very high risk of becoming
out-moded or obsolete, sometimes very quickly.
How does this long personal business story
apply to the subject at hand, the changing face of the retailing
of gear in our sport? I see many parallels, but in this case
the big factor is the world wide web. The web has opened thing
up considerably. Not that long ago you would look through a magazine
like Couloir or Backcountry and all of the boot prices from the
mail order shops were the same. There were few options but all
that has changed, and the changes have a lot of people very nervous/
Already distributors of telemark and backcountry
ski gear are moving to protect their dealers. In researching
this story I was told by a number of distributor sales reps and
retailers that customers with goods needing warranty service
bought from shops outside their dealer network would no longer
be taken care of.
One very large distributor of telemark and
backcountry gear put it this way: "we used to be very loose
and accommodating in the warranty area, if it was a product we
distributed we would help the customer, no questions asked, regardless
of who had made the sale. All that is over. We will not warranty
gear bought from shops outside of our dealer network. We want
to help our dealers stay in business, there is not much we can
do in the face of deeply discounted internet retailing but this
is one thing we can do."
A western states sales manager for a big name
ski manufacturer, when interviewed for this story, told me that
his company had recently altered its warranty policy--all skis
being considered for warranty replacement or credit now must
be returned first to the dealer where the customer purchased
the product, the dealer then receives a return authorization.
Consumers will no longer be allowed to deal with the distributor
directly.
Word has also come to us that a distributor
for a very well known tele-specific ski company is now keeping
track of the serial numbers of all skis it is importing into
North America. This is being done in an effort not just to protect
the dealers but also the distributor himself. He (understandably)
does not want to warranty product that he has not made any money
on.
Independently we have heard that many other
distributors are tightening up too. From avalanche beacons to
ski poles. Expect this trend to continue.
Meanwhile, local retailers of tele and backcountry
skiing gear are stepping up their customer service and pointing
out to any and all who will listen the advantages that accrue
to the customer by dealing locally. They are talking about the
value of demo opportunities, boot fitting by expert sales staff
and all of the other help skiers have come to expect from their
local dealers, including shop tech services.
Then there is the great BD/Scarpa/Telemark-Pyrenees
situation that many of you telemarktips.com readers followed
closely here last spring. It is a long and involved a story without
the clear villains or heroes that at first we thought we had.
The gist of the story is that TP was selling
Scarpa boots to folks in North America at prices below what local
dealers were paying their distributors! (sound familiar?). TP
was able to do this because of a combination of factors. They
were selling the Terminators at standard French prices (already
lower than in NA) and deducting the fairly substantial TVA (a
value added tax), as they do
with all duty-free shipping. This brought the base price down
quite a lot, then with the exchange rate (the dollar remains
very strong) the final price to the North American customer was
astoundingly low. And of course the mail-order customer saved
again by not having to pay a state sales tax! Even with shipping
the customer was getting a deal that rivaled or even surpassed
that which was available to shop employees using a pro-form!
Anyway, the story goes that Black Diamond, honorably trying to
protect their dealers and perhaps less honorably, acting in their
own self interest (and preservation?) pressured Scarpa to either
stop selling to TP or get them to raise their prices.
It is interesting to note that in the past
tele skiers in North America have often bought from across the
pond, looking for a better deal. TP caught heat because they
were smart and saw that the web offered a way for them to circumvent
a traditional and somewhat out-moded distribution channels. Being
very fluent in English and understanding how Americans and Canadians
want to do business on a retail level put them in an excellent
position to capitalize on this new paradigm of international
niche marketing.
Ironically, Telemark-Pyrenees agreed to some
conditions imposed by Scarpa but now find themselves needing
to make their own call to Scarpa, similar in nature to the one
Black Diamond made last season!
Where does this leave us? It is not totally
clear yet but there can be little doubt that opportunity abounds.
This could not have been made any clearer then it was last season
when a little shop on a backstreet in France became famous and
rocked this industry.
Will any of the moves being made by distributors
and dealers to shore up their retail channels work? Maybe in
the short term but long term the world wide web will continue
to have a huge effect on retailing. And niche markets will be
among the first to feel the full effect of the web's power to
alter traditional and/or obsolete distribution channels.
I think you can expect to see more direct
marketing of tele and backcountry skiing products from manufacturers
right to consumers, like the gentlemen from Narvik in Norway
are doing with their new tele binding. And don't be too surprised
if you see some of the more established gear makers bringing
product directly to market via the web. Relations between manufacturers,
distributors and retailers are often strained and some may want
to try this alternative way to get their goods to the end user.
There are some interesting factors and possibilities for consumers
here as well, which we will explore at a later time.
Shops and independent dealers that expect
to count on customer loyalty and value added services to see
them through could be in very big trouble. The siren call of
lower prices is a strong one and often the customer is drawn
to the "best deal" like the proverbial moth to the
flame. No one can tell where all of this will lead, the value
of a local shop cannot be denied but the value of a substantially
lower price cannot be ignored either.
These are strange days indeed for retailers,
distributors and consumers alike. All are well advised to proceed
carefully. Opportunities (and deals) like never before are presenting
themselves to all of us at every level, but like the moth, we
must be very careful in getting too close to the flame.
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