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The Elephant in The Room

By Ritchie Sayner

Advanced Retail Strategies

Once upon a time not so long ago, pre-Covid for sure, the biggest worry a retailer had was that the store down the street might carry the same vendors. Heaven help us if they had the nerve to sell them for a few dollars less.

Fast forward to 2021 and those concerns pale in comparison to what the independent retailer contends with today. What retailer on planet Earth wouldn’t take the competitive challenges of yesteryear versus dealing with today’s Internet-driven issues?

Dream Becomes A Nightmare

Consider the following scenario: You are at a market and discover what you believe will become a “hot” line for your store. You are promised “exclusive” rights to the line in your trading area to give you an opportunity to develop the brand. Your customers love the line and your competitors are champing at the bit to buy it should the opportunity present itself. All is good until one day you discover (or worse yet, a customer does) that same hot line is available online. Needless to say, that’s a problem since now all the customer has to do is open a search engine on any device and see the same item that you carry and more. You try to convince yourself that your customers will shop locally and support your store. That all sounds good until the price changes. Now the same item is available, in some cases, for 30 percent to 60 percent less than you are selling it for, the shipping is free, and the item arrives at the customer’s doorstep the next day. Sorry, but that customer loyalty thing just went out the window. OK, so you accept the fact you now must compete with Amazon. But wait, there’s more ... as the commercial goes. You now discover your new vendor has the very styles you carry on their website. And they are NOT directing customer inquiries back to you in most cases, they are selling direct to the retail customer - YOUR customer! If that isn’t enough, some vendors are starting their own “rent the runway” type services. One store I work with notified me that items she had in her store for only four weeks could be found on the vendor’s rented site. Her initial reaction was to cancel all future orders from the vendor. Who could blame her? The reality

of the situation, however, is that she would have to replace the merchandise with something else and that isn’t always that simple. As if business for the independent retailer isn’t already challenging enough. Now the competition isn’t just the store down the street, but the vendor you thought you were partnering with to build a mutually beneficial relationship. Think again.

MAP Issues

You agreed that you would not advertise a price below the Minimum Advertised Price (MAP) until a certain prespecified date. If you get discovered going against the agreement you will most likely incur the wrath of the vendor, via a stern warning at least, and losing the line at worst, should the practice continue. But what happens when the vendor violates his own policy? Not much as it turns out and it happens all the time.

What Can You Do?

Having collaborated with both retailers and manufacturer’s representatives, a few proactive options are offered for consideration: • Search out resources that do not sell on Amazon or other shopping sites. • Ask potential vendors if they sell direct to the customer from their own websites or if online inquiries are referred to a local retailer.

• If the same items are found on a vendor’s site or on Amazon, you will most likely need to reduce your retail price to remain competitive. Ask that the vendor make up the difference in markdown money. Not a credit toward next season’s purchases - a check!

• You may wish to return the unsold items to the vendor. I also believe you would be justified in charging freight back to the vendor. Obviously, this is costly not only from a time standpoint, but also the opportunity costs since you now must find a replacement for the items in question. • Should the practice continue, you can always reduce or cancel current and future orders. This is easier said than done since in some cases it is difficult to replace the volume generated by major lines. • With regard to apparel lines, creating a private-label program should be considered. A store label promotes the store name and brand and helps shield the retailer against online comparison. • Know your numbers on each brand you carry. This is especially important if the brand is selling through distribution channels that are in direct competition with you. If a brand becomes unprofitable, it is your responsibility to work with the vendor to find a mutual solution. If a satisfactory outcome cannot be reached, there are only two choices available to you: 1) maintain the status quo and remain unprofitable or 2) find a replacement for the brand.

• Have written vendor agreements in place with specified end-ofseason gross margin targets as well as liberal stock balancing and return privileges on slow selling merchandise. • Regarding MAP violations, once the vendor is in violation of its own policy, on what grounds would it still be enforceable with a retailer?

• Vendors, at the very least, should offer discounted merchandise to their retailers first prior to liquidating by using alternative methods.

Ritchie Sayner

Sayner has spent the past four decades helping independent retailers improve profitability. In addition to speaking to retail groups nationwide, Sayner is a regular contributor to retail industry publications. Prior to embarking on his retail consulting career, he was the general merchandise manager for an independent department store in the Midwest. Ritchie is a graduate of the University of Wisconsin-LaCrosse. He is also the author of the book, “Retail Revelations-Strategies for Improving Sales, Margins, and Turnover.” He can be reached though his website at www.advancedretailstrategies.com.