Opinion: The problems we face
Kids Today Staff -- Kids Today, 8/6/2012 11:06:57 AM
Editor's Note: This is a guest editorial written by retailer Sheri Gurock, owner of Magic Beans.Last month Magic Beans celebrated eight years in business. And while I'm an incurable optimist most of the time, when people say "Here's to eight more years," I can't help but think that might not happen.
Our industry is on a path towards self-destruction, and unless something dramatic happens to change the course of things, I don't think very many specialty retail businesses will survive.
But I'm an optimist, remember? So I believe things can change.
What are the problems?
1. The diminishing role of the retailer in making the sale
Nowadays, there's a lot of information available to parents before they ever set foot in a store. It's rare you'll meet a pregnant woman who hasn't done at least some research already. More common are the folks who have already narrowed their choices down to two or three options, and are just coming in to kick the tires, ask some questions and then high-tail it home to find the best deal on the Internet.
Parents trust the advice of other parents. That's what the research says, anyway. So it's important to the manufacturers to make sure that parents have good things to say on blogs and in product reviews. But this has gone to an uncomfortable extreme. We frequently get manufacturers writing their own glowing product reviews on our site. It's blatantly obvious and it's embarrassing. And more and more I'm finding out about new product releases - even from manufacturers I'm close to - from blogs.
The manufacturers are training parents that bloggers are their most trusted source of information. Where does that leave the retailers? Just a few years ago, our expertise was essential to our value proposition to parents. Now we're being relegated to the back row of a very loud chorus.
What's a retailer's goal? To give customers a great experience and match them up with the right products for their families. What's a blogger's goal? To attract traffic to a website. Does anyone else see a problem here? I'm not saying bloggers aren't awesome (many are), or that they don't have a place in strategic marketing - of course they do. But they need to take a backseat to the retailers.
What can be done?
Launch great, unique products that will stand on their own merit and get the good reviews they deserve. And get back to launching products with retailers. Skip the expensive parties for the bloggers (and I say this as a blogger who has been to a number of these parties). Spend that money on in-store events. This makes all the sense in the world, because any good blogger will be happy to review a good product, cocktails notwithstanding. Instead, work with the bloggers to get them to send their readers to specialty stores and not to Amazon.
Finally, get back to investing in local advertising that sends people into stores. The collapse of print advertising in recent years has sent this old habit into a tailspin, but manufacturers have yet to embrace newer methods of local, digital advertising to support their dealers.
2. The inconvenient truth about MAP pricing
More and more manufacturers are hiding behind their lawyers with regards to MAP policies, calling them "too risky." That's hogwash. The Supreme Court has made it clear that MAP policies are perfectly legal, as long as they are not a product of collusion between a retailer and a manufacturer. If a manufacturer believes it has a premium product that should command a premium price, it can choose to ship product to retailers who will uphold the reputation of the brand.
Over the last few years, several of our most important manufacturers have dropped MAP pricing, and our sales have plummeted in every instance. Products that used to be best-sellers are now gathering dust in a corner, having lost all their momentum to the internet bargains, ripe for the picking. These manufacturers wonder why our business is down year over year. Seriously?
Some manufacturers have stood by MAP pricing, and they should be commended. But this needs to be a group effort. If every single premium brand in our industry made a commitment to MAP pricing, it would make an enormous impact on the long-term viability of brick-and-mortar juvenile retail.
What can be done?
This is obvious. Manufacturers who value their brand equity should choose their accounts wisely, develop strong, legal MAP pricing policies and enforce them.
3. Specialty exclusives are almost never worthwhile
Anytime a manufacturer talks to me about a "specialty exclusive" product, my heart sinks. More often than not, it's the strangest, least appealing pattern or color in the product line. At the recent ASTRA show, one toy manufacturer was trying to drum up enthusiasm for the sad assortment of toys labeled "specialty only." Who could ignore the small type on that sign? "Quantities limited! Once they're gone, they're gone!" Retailers aren't dumb. These were clearly the poor performers, destined to be discontinued and sent to TJ Maxx. But if we wanted them, they were all ours. At full price. Thanks a lot.
What can be done?
I salute Chicco, who is leading the way here. They took their BEST pattern and reserved it for the specialty market. They made it a higher price, and they're re-implementing their lapsed MAP policy. The other manufacturers should follow suit. Why not take your very best products and give them exclusively to the specialty stores?
4. Channel strategies are warped
The manufacturers need to decide whether the specialty channel is important or not. Here's what would be easy and profitable: to sell everything directly to the consumers. Who needs the retailers anymore? The bloggers will spread the word, and the manufacturers will get to keep 100% of the profits (except for the few times a year they do a deal on a flash sale site). Who cares if the experience of shopping for a new baby is something precious and memorable? Or if the very best way to shop for these products is to touch and feel them?
And forget the customers for a minute. Let's think about how many livelihoods will be lost if every specialty store in the country folds, because we have become an afterthought in the channel strategy. The juvenile market is big enough to sustain us all, if we play our cards right.
A few months ago, a manufacturer who I truly adore, who is a longtime champion of the specialty channel, came to Boston and took my team out to dinner. He showed us a beautiful new color for a popular product. There was already a container full of them on the water, and he wanted me to take them all. Now I don't know about the rest of you, but even with five stores, I don't buy by the container. I explained it was too much of an inventory commitment for us, but I said we'd love to take some.
A few weeks later I found out he'd sold the whole container to Amazon. I asked why he had done that, why had he given them this distinct advantage when they already had so many other things going for them? He had done it because it was easy. It was one phone call and he sealed the deal. Far simpler than trying to split the shipment among his 10 best retailers.
Had I been more proactive, I might've made it work. I wonder if I should've offered to make the calls. This is what it's come to. If we want to survive, we have to be willing to do someone else's job.
What can be done?
This one will hurt, but I think it is the most important. The manufacturers need to stop selling direct to the consumers. They need to thumb their noses at the flash sale brigade. They need to think hard about whether or not they should do business directly with Amazon, which doesn't even try to make a net profit on most of the things it sells. They need to commit to making the specialty retail channel a cornerstone of their growth strategy. The demand will always be there for these outstanding products. Let's funnel the customers into the stores.
5. It is not easy enough for manufacturers to work with specialty retailers.
I don't want to leave anyone with the idea that I think the manufacturers bear ALL the responsibility for the challenges facing our industry. Partnerships are a two-way street, and the retailers certainly aren't perfect. We're passionate about our products and our customers,
but that doesn't always translate to good business acumen or good marketing.
We have no organized community of retailers in our industry. The toy industry has this, and it works very well. ASTRA is a wonderful, vibrant, strong organization that supports its members and makes it easy and attractive for manufacturers to reach the specialty market. It provides opportunities for members to network, help each other and learn from one another.
What can be done?
The good news is, we are already working to solve this problem. The board of ABC has appointed a new retailer board that just met for the first time in Chicago in mid-July. This group is tasked with creating a new association that will serve as a nationwide community for all independent retailers in our industry.
I am very proud to be a part of this new endeavor, and I can tell you that the optimism, the enthusiasm and the energy in that first meeting was incredible. There is still a lot of work to be done, but if we can start to address the challenges inherent to the retailers themselves, I hope we can send a strong signal to the manufacturers that it's time for them to step up as well.
Our industry has blossomed because of innovation. So why is it that so many manufacturers are acting like lemmings these days? In other countries, the brick-and-mortar retailers are still vital and important. On this side of the ocean, there are some industries that are successfully carving out a place for their specialty retailers, thanks to the commitment of the manufacturers.
Go look at the Trek website (http://trekbikes.com). It's amazing, filled with information, specs, product reviews, videos... the works. But guess what's missing? A shopping cart. Once you find a bike you like, you can click to find a retailer that has it. And guess who sells the bikes online? Their authorized brick-and-mortar retailers. Guess who doesn't sell Trek online? Amazon. Same goes for Specialized and many others. Can you buy a bike on Amazon? Yes, but not if you want a really good one.
Why can't we emulate this in our industry? We can, and we should. And if we don't, I know my business won't make it another eight years.
This is incredibly well written, informative, and a great call to action. But I'm not a manufacturer or a retailer, and as a consumer, I find myself and my interests nowhere in this article except in the abstract. I value and patronize small businesses, almost to a fault (if you ask my husband), but the changing needs and desires of parents and consumers do not, seemingly, factor into your grand plan. That, I believe, could be a flaw in some of your otherwise excellent logic.Caroline Marin - 2012-08-22 15:27:59 EDT
While I fully agree with your comments, I guess maybe some specialty store are just not specialty enough! I run a natural parenting baby store and I can tell you for certain that my customers (my tribe!) they shop at my store, they are dedicated and they truly understand the importance of local. My customers understand why my prices are higher than amazon! They shop with me BECAUSE of customer service! They really do value my time, my kindness, my experiences and most of all my friendship.
Natalie - 2012-08-13 09:11:32 EDT
I wonder maybe if you have to change direction. It is not always about changing others to suit your business. You as a retailer have to be able to change too! Perhaps that means refocusing, looking for small retailers that actually do offer speciality products. I would say at least half of my products cannot be found on amazon, or other online stores. they are made by small business owners. Those products are out there, you just have to put more work into finding them! Don't sign on with a company that is not going to support you, or switch suppliers if they change their direction. You are in control of your business, so show customers how special your store can be!
I am so appreciative that this article was written as I have been speaking to my vendors about the same thing for months now. The truth of the matter is that they are all affraid to leave Amazon due to the volume of sales they produce and exposure they get. However I feel that if someone could not get it on amazon they would get it at a retail store if that is what they really wanted. Amazon also uses all the information that retailers post on their site to their advantage when it comes to their pricing. If one person drops their price, their system automatically drops theirs so that they can be more competitive, hence using the retailers information to make them more profitable. And if a retailer happens to sell something on there, they take 15% of the sale. I stopped selling on Amazon and I wish more and more retailers would stop selling as well. Why support the monster that is hurting us all.
Rick - 2012-08-10 16:54:04 EDT
As it relates to bloggers, and I do a little blogging as well for my store (not my speciality), the one issue I have with them is that everything is the greatest. the handle bar is great, the wheels are great, the seat is great, etc. etc. That is not what a customer needs to hear. they need to know what is good for them and what is not good for them so that they can make the best purchase for themselves. it is personalization, and that can not be done through a blog or on amazon for that matter. But I will say that bloggers are a valuable way for consumers to learn more about products, so do get and appreciate their existence.
In regards to manufacturers selling online, I could not agree more. I found that even at times the manufacturer had a better deal than me and they are also advertising on means like google adwords to get cunsumers to purchase from their site. Something is not right with that.
I understand that these are troubling times for all, but the reality is that the consumer has changed as a result of the economy, and even if the economy gets better, their frame of mind will not change, unless the manufacturers do something to help it change. And in regards to amazon, well we are all guilty for creating that monster, and now the monster is working against us. Now with company's like Best Buy and Sears changing their models to the same as amazon, it will only get worse.
Small retail is important and if we as consumers do not support it, it will fade away much faster than the 8 years that Sheri outlined.
If people can get it cheaper on line....and get same day or next day delivery for free (as Amazon is working on)....and not pay sales tax....can you blame them?
Rick Henry - 2012-08-07 23:09:05 EDT
1. Contact your congresspeople/senators and make sure they support one of the two sales tax fairness bills currently before Congress.
2. Make sure you have dominant assortments in the categories that make sense for you (could be Infant/Toddler.....Science.....books...whatever) And be sure your prices are competitive....maybe 50% does not make sense. Don't give a customer a significant price difference to shop elsewhere .
3.Specialty is no longer special. Have what they want. If that means Razor scooters at 40% MU.....so be it. As long as they turn.
4. While service is a plus.....most studies say it is overrated. Assortment trumps all. Friendly sales associates with great assortments will probably have more value than best of class sales associates and limited assortments.If you can afford both....great.
5. Maintain price integrity. Do not train your customers to wait for sales. One or two sales a year......probably OK.A couple of coupons.....OK. Your prices should be credible 365 days a year.
6. Special events.....great if they are meaningful. If you spend a lot of time and $$ on something that brings in 10 kids.....thats a feel good thing but probably is not going to move the needle on sales
7. Finally....can we somehow band together to get our vendors to stop handing business over to on line or flash sales sights? Makes me crazy when I am at Toy Fair and my appointment follows a Zulilly buyer. I understand the need to dump large quantities of overstock....I really do.....but basic ongoing good product? Its a kick in the head.
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