Retail Sales Of Gear On the Web
 

 

The New Paradigm:

The Web, Tele and Backcountry Gear Retailing

Part 1

By Mitch Weber

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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