The Problems We Face
Kids Today Staff -- Kids Today, 8/1/2012 2:00:00 AM
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?
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.
The inconvenient truth about MA P pricing
More and more manufacturers are hiding behind their lawyers with regards to MA P policies, calling them "too risky." That's hogwash. The Supreme Court has made it clear that MA P 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 MA P 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 MA P 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 MA P 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 MA P pricing policies and enforce them.
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 MA P policy. The other manufacturers should follow suit. Why not take your very best products and give them exclusively to the specialty stores?
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 ten 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.
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 (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.
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