How online retailer buyers can kill you

This isn’t intended to strike fear in the hearts of kindred but I’ve been reminded of an increasing trend which suggests I should mention this again. This applies to those of you who are selling wholesale or want to sell wholesale. I’m not referring to those of you who sell consumer direct over the internet.

The issue? Retailers are getting clobbered over internet sales. They think it’s your fault -and in many respects they’re right. Knowing why they are right can make a dramatic impact on your sales and help you acquire new retail accounts.

Today more than ever, a retailer does not want to buy from you if you cannot enforce your retail price points. There is no good reason they will pay top dollar for your stuff if you’re not policing other buyers who are discounting your products on the internet. As the Financial Times said last week:

[…]the rise of internet shopping threatens to turn stores into glorified product showrooms where consumers view goods before ordering them more cheaply and conveniently online.

A fifth of all internet purchases now involve prior in-store research [and] that online-only retailers are picking up “significant sales” from consumers who browse goods in shops, then order from cheaper internet sites.

Now I know you’re hungry but you don’t want to take orders from just anyone. I know you can’t afford to exclude online retailers but they must prove they are enforcing price points of their existing lines (ignore this and this earlier advice to your peril). Even if selling online, you must limit their territories. For example, they should only be allowed to sell from their own sites. Not Amazon, not eBay, not Half.com or whatever. Only their own sites. This verbiage must be included in your terms of sale contract. This way if your stuff should end up on eBay or whatever, you can have it removed more easily.

Some of you think you have to sell to whomever wants to buy. This is a fallacy. Legally, you can sell or not sell to anyone you like (or don’t like). According to a 2007 Supreme Court decision, you can stop selling to someone just because they aren’t enforcing your price points. Legally, you can stipulate minimum retail pricing.

I stumbled across an unrelated company this weekend whose pricing boundaries are so porous that there is little incentive to pay full price. The (software) product is $60 but other parties are selling it on Amazon for $35. Worse, the company has understood the internet purchasing mechanism so poorly that multiple downloads of their product are available free on piracy sites. In short, there is no incentive for a retailer to buy it wholesale from its producer. So maybe in the beginning the software manufacturer thought they couldn’t turn down the internet retail buyers but with their policies so liberal, no other retailers want to re-sell it now because consumers can get it free or half price on the internet. You don’t want this to happen to you. I’m not saying it’s easy but there are strategies one can use to enforce the value of their product.

But back to the Supreme Court decision; one reason it was overturned was that more uniform pricing could lead to better customer service and amenities if pricing was more or less uniform. Even four years ago, the Court recognized that consumers today are often using retail stores as places to try on clothes but they go to the cheapest place they can find online to buy it. Meaning, the brick and mortar store is stuck with shop worn goods for a sale that someone else gets.

A member in our forum says this is why she got out of the bridal business. She says she went into bridal retail with rose colored glasses. She thought if she provided superior service, she’d capture the sale. But she said, “the majority of the time, loyalty is thrown completely out the door!” She said that in order to survive, she

removed the designer info from the dresses, I did not allow pictures, I instructed my consultants to not disclose the designer info, style # or size until purchase was made… It was THEN that I actually started doing business! I know that it sounds extreme but it was the only way for my business to survive!

It’s really not about the amount of competition out there, competition is fine as long as everyone is playing on a leveled playing field. Unfortunately, the operational cost of online store is a small fraction of a brick and mortar store. Financially, it makes sense to open a online store but if every bridal store was an online store, where would the brides go to try on dresses? They certainly wouldn’t order it online without trying it on first.

Summary: None of this is anything that hasn’t been published on this site previously, I just thought it could bear another airing since it’s been in the news so much of late and with so much content on this site, it’s hard to find stuff.

Related:
Hangtags, labels & domain names- competing with your customers?
The battle of retailers vs manufacturers
How eBay can kill you
How eBay can kill you pt.2

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9 comments

  1. Kathleen says:

    Is anybody out there?

    JT Morgan sent a link to Costco to sell designer wedding dresses at 40 per cent off to me this morning.

    There are two lessons to take from this. First, the styles Costco is selling are exclusives. If no one else has them, it is a useless exercise to attempt to find another vendor. Indirectly, this explains why retailers have become extremely interested in exclusives. There was an article about this (WSJ? WWD? CAN?) but I can’t find it now.

    The second lesson is, buy it now at this take it or leave it price. The advantage to the designer is they have a large order with penetration in at least 410 retail locations which exceeds their current retail presence.

  2. dosfashionistas says:

    Just a short comment on, specifically, eBay sellers: More and more clothing sellers on eBay are holding to a higher price point. It is a trend that eBay encourages in all categories, so you may well find a seller you can work with.

    If you can, selling there can build you brand recognition…even the kind you want IF the seller is one who presents the merchandise in a professional way. Many eBay sites these days look as good and operate as slickly as the best web sites, and just as many don’t. Which is point two, be sure to know how your garments will be presented as well as at what price.

    And don’t think that all cheaper prices you see on eBay (I speak of it only because I know it and I do not know Amazon or other venues.) are the result of undercutting the retailer. Most of it is shelf pulls and closeouts bought from jobbers; merchandise from last year or the year before. And irregulars. If it were in a store, it would be at much the same price, except a store would not keep merchandise that long.

  3. john says:

    This happened to us, but in reverse. We spent a lot of time and effort pushing a brand that we believed in(TOMS). We sold them online and in-store and were selling them at normal retail price. Unfortunately, many other online stores were not doing the same. They ended up not letting anyone( accept a few major stores like macy’s) sell them online. My guess is, this can get out of hand pretty fast. Many of the people we buy from will not sell to just any online store.

    I also knew of a retailer that would buy 1000’s of units in higher price point denim lines keep them in his store for a short time and dump to someone at a profit of only a few dollars a pair. You have to be very careful who you sell to. Another example is a line by urban outfitters. This was one of our better lines and most popular. They started selling to a department store, who after a short period of time discounts it heavily. Our sales of it have gone down and we do not carry as much of it as we used to. Beware if you sell to big stores. They are not in the business to build brands but to turn a quick buck. I think it was Halston who started selling to department stores in the eighties and soon tarnished his brand beyond repair. On the other hand someone like Nordstrom or Macy’s can make you. Just be careful.

    Many people we buy from required us to provide images of our stores inside and out. We also had to provide a list of other vendors that we carried. This is pretty standard practice. This might help some of you. Best of luck.

  4. Bente says:

    Very interesting subject!
    This is something that can hurt the clothing business in all ways, but it is also something we can turn into our advantage much more then with other kind of products.
    A lot of people out there like to touch fabric, feel the quality and try it on. Ok, then they go right home buy it online; educate, make new rules (not easy) or just get everything under control: sell to few on-line stores that has the same prices as the retail (target retail prices!). Your Rep. knows who is good!
    Or ask around on this members forum!
    I use to tell my husband when he starts to look a product up on Amazon (in the store); I pay you the difference! We have to support local businesses if we want them to exist!

    I work with children’s clothing. I sell to the most upscale retail store in Houston, Texas and other independent retail stores around the country. They are a very good client. I would never let the collection they (or the other stores) have in season out “wandering” in on-line stores for lower retail prices. I simply don’t think it’s a proper thing to do if you want to have a good cooperation with retail stores and if this is your main target/business.
    You have to define your target.

    I know about a quite new brand that “accidentally” put out their over stock (in season) to one of this Discount closed membership on-line retailer (they buy 40% off wholesale price and sell 50% of retail price!). One of the store found out and called the Rep. furiously!
    They are having a tough time getting more into that store and word spread easily.
    This discount closed membership Online retailers is another subject.
    Even if it’s “closed” anybody can sign up and shop.
    Another aspect is “to get more Brand recognition”.
    I would love to hear more about this aspect through on-line retailing!

  5. Kathy Jo says:

    I have a question, for someone who will be in the market for a rep one day, hopefully soon. How do you make sure your rep is one that will protect the brand rather than take as much commisison as possible?

  6. Bente says:

    Hallo Kathy. We have been talking a lot about that on the forum.
    Finding a good Rep. is the result of hard work and a lot of research; asking retail stores/buyers, get references (as many as possible), visit the markets, talk to other designers and others in the business etc.
    If not you will never know!
    You are the only one that can protect your brand. The Reps work to earn money. Commission is more or less the same all over.

  7. Suzanne says:

    OMG Kathleen, you are the best. That is EXACTLY what I need to add to my contract. I find it amazing that I have to keep adding verbage to the retailer agreement but I so do.

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