Hangtags, labels & domain names- competing with your customers?

This topic came up today as I was talking to Kathleen about an internet retailer who has developed a line of merchandise. It’s a complicated issue but basically, the internet retailer is selling the line to other retailers (internet and brick and mortar) but the brand name is also a website and a very popular one at that.

One of the issues that comes up when you’re manufacturing apparel is whether or not you should put your domain name on your hang tags or garment labels. If you’re only selling to consumers directly over the internet, this isn’t an issue. However, if you’re also selling to stores or plan to, putting your web address on hang tags may become a problem. Kathleen and I have talked about this quite a bit, from both sides of the fence.

If you know anything about Kathleen, she is very much about humanizing the apparel manufacturing process. She thinks it’s important to show that there are real people, with real lives, who work in decent working environments (not sweatshops) who make the clothing that people wear. She thinks consumers should know that a manufacturer who produces domestically supports American workers and local economies and helps families make a living, many of whom don’t have other marketable skills outside of the apparel manufacturing industry. And if Kathleen had a sewn product line this is exactly what her website would be about.

I only wish more companies were like Kathleen.

Usually, you’ll find that companies with very large department store distribution tend to have informational websites with glitzy photo shoots, a media section with press releases and magazine clippings, sales rep contact information and maybe a restricted access area for buyers. The reason the these sites are this way is that companies with department store distribution usually cannot create an ecommerce website without encountering serious backlash from their big retail accounts, especially if those retailers also have websites that move a lot of product.

Designer entrepreneurs however, often sell directly to consumers through their websites and for good reason. For starters, they can often show their entire line while a retailer may only have a portion of it. Second, they often use it when seeking press so that consumers will know to buy the product. Third, they can get a higher profit margin selling retail. However, this becomes a problem if the DE’s site is so successful that they become a serious internet retailer. By that I mean DEs move to put up revamped websites designed to facilitate ecommerce with buying pay per click ads on Google and Overture, advertising online in different e-zines and blogs and so on. They start taking internet retail very seriously. This creates a sore spot between the DE and the independent boutique because the stores feel like they are competing with their supplier for sales. This becomes more of a concern if the boutique has a website companion to their store or is an internet-only retailer.

As it is, retailers are leery of DEs having ecommerce websites, but the thing that really makes this a problem is if the manufacturer puts their domain name on the hang tag or product label. Retailers see this as a way of subverting their sales because customers have no incentive to return to the store if they can purchase the product from the manufacturer directly, especially if the manufacturer is selling at the same retail price as the store is. Some manufacturers have even been known to undercut their own retailers with pricing, selling under suggested retail price! By the way, that’s a great way to lose all of your retail accounts. Retailers usually will not accept your product with the domain address for this reason. Under these conditions, the retail store is forced to play a game under unfavorable conditions because the manufacturer only has to pay product costs, whereas the retailer has to pay the wholesale price.

This is a very tricky issue, especially when it comes to new DE’s. If you do this, you will turn off some retailers and you may cannibalize their sales and never get the chance to fully develop your retail distribution channels. For those who only sell wholesale, this won’t be an issue at all.

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  1. Tom Willmon says:

    From the consumer viewpoint I don’t get the problem of a manufacturer selling on the i-net at the same price as a retailer. If travel to the retailer is less expensive than shipping, I’ll buy there, particularly if I want it now. However, living in the boonies as I do, mailorder often works.

    Having been a retailer, I would be plenty pissed at a supplier that competed with me, selling to my customer at my (wholesale) cost.

    So am I missing something in your arguement?

  2. MW says:

    >So am I missing something in your arguement?>So am I missing something in your arguement?< I don't know, because I don't understand what your question really means. You're saying as a consumer you like it, as a retailer you don't. And I'm not talking about manufacturers selling in season goods at wholesale prices, so either I don't understand your comment or my original post wasn't clear. To reiterate: If you are a DE and you sell online, you will encounter some issues with retailers. To what degree, I don't know, it all depends. If you are a DE who sells online and you direct traffic to your website by putting your domain name on labels and/or hangtags, you will have even more resistance from retailers. I hope that's clear.

  3. Gigi says:

    As a retailer, I generally won’t do business with manufacturers who will sell directly to the end user. I have no reason to – there are too many other companies out there from whom I can buy my product. The last company I dropped not only sold to one of my customers at a discount but also told them what my wholesale price was! Makes you wonder who’s in charge, doesn’t it?

  4. Cinnamon says:

    Thank you for this. The first order I sold to a retailer was a huge pile of confusion. She was fine with my product, thankfully. But she emailed me and asked me if she could take my hang-tags off and put her own on because she didn’t think mine worked with her store’s image. Since I had my logo (which incorporates my business name, which is also my url) I told her I didn’t mind. Then I asked her what was wrong with my tags so I could improve it for the future. It was 4″x2″ folded in half, with my logo on the front, a small description of the item inside, and “Thank you for buying handmade” and my url on the back. She said there wasn’t enough room for her price sticker on it. It ended up being the only order I sold her (she wouldn’t me to cut my wholesale cost in half and I couldn’t justify it) and in the last email I got from her she told me that she didn’t appreciate my trying to build business in her store and then steal people away to my website.

    I know think I understand what she was talking about and wish things had gone differently a long time ago. I’m going to be recreating my hang-tags very soon and this is valuable information.

  5. Christy Fisher says:

    [This comment has been edited by Kathleen. Christy is a prolific commenter who’s added 3 separate comments on just this post in less than an hour and I thought I’d combine all of her comments on this topic into just one. That way the rest of the most recent comments from others wouldn’t be pushed off the recent comments list]

    I started putting my website on my hangtags about a year ago. A few retailers were not thrilled, but I make a point of putting the “www.” at the lower part of the tag and if they don’t like it, they just cut it off.
    I have been up front with my wholesale buyers and I let them know that if a retail customer contacts me for a direct order, then FIRST direct them to the closest store that carries my work. If the are not near a store.. then I sell to them directly. If they have have a store nearby, then I direct them to the store and the order is placed through them. I do not undercut my buyers.
    I find that a lot of buyers remove tags because they do not want another STORE OWNER finding out how to track me down..
    ..and something I saw recently in LA.. a young designer has her moniker on her LABEL as a dotcom.
    How cool is that!
    Her company name is like xyz.com or something.
    Makes it simple.
    The buyers can’t do a thing about it..

    ..and Cinnamon: I think the buyer you described above was just giving you a crackBuyers don’t call and ASK if they can have permission to remove your tag- they just DO IT if they want to.
    Once a buyer BUYS something, then they can do whatever they want to it.

    ..now if you are talking about a consignment issue, then that is a whole ‘nother ballgame-
    that’s not really a “buyer”

    ..and Gigi:
    too bad you have that attitude. You probably have missed a lot of sales by not carrying some great lines because of your fear.
    A LOT of my stores have GAINED customers because I send them their way through my site.
    (See my first post on this.)
    If you have a good relationship with your vendors, then the trust issue shouldn’t even be an “issue”.
    I have my merchandise on my site at full keystone..I never sell discount to my retail customers..and my wholesale buyers are grateful for an “online catalogue” that not only makes it easy to buy for their store, but they can print out pages and show their retail customers.
    It has been a win-win situation for me.
    AND.. if a customer is savvy and sneaky enough to want to scratch, all they have to do is “google” the designers name and they can get in contact with almost anyone..
    ..so there is no need for paranoia if there is a good relationship between buyer and wholesaler.
    It shouldn’t be a “power trip” between the two..
    It should be like a great marriage ..with support for each other, no undercutting,etc.
    You can always remove the hangtags.
    ..or just ask the designer to cut off/ or black out the “www.” part.

  6. Eric H says:

    There is a potential win-win solution here that Tom skirted. The hangtag can point customers to the DE’s website. The website can have additional product lines that the retailer isn’t carrying. But why should they be in competition with one-another? Why can’t the boutique be part of the logistics chain? With an established relationship, the DE and retailer should be able to work out a deal where the material can be shipped to the customer through the retailer. That’s the model embraced by Best Buy, Target, Lowe’s, and a number of other businesses that have both brick-and-mortar and online retail sites. Most of them even link to the manufacturers’ websites right off the product description. You order off the site and pick up and the retail outlet.

    Pella – a high-end brand of windows – markets some but not all of their windows through Lowe’s hardware stores because there are many options, customers need to see and perhaps feel the mechanisms and finishes, and Lowe’s adds value by providing help in sizing and warranty repairs and returns. Sound familiar?

    But Pella also has retail outlets. I can only assume that Pella offers deep discounts to Lowe’s to take advantage of Lowe’s higher traffic and outlet penetration. It’s mutually beneficial.

    I doubt very many individuals are successful at simultaneously designing, manufacturing, and retailing unless they have a large, skilled staff. Zara does it well, but Zara is hardly a DE startup. From that standpoint, I can see why some retailers would want to avoid such DEs, especially if they already have plenty of other good sources from which to choose; it’s likely that the design and manufacturing will suffer as the DE devotes more time to retailing and the issues therein (website design, website content, shipping, returns). One of the websites promoted in a recent comment struck me as an example of this – unimpressive and poorly made garments, augmented with ready-for-Stuckey’s jewelry and accessories.

  7. MW says:

    But why should they be in competition with one-another? Why can’t the boutique be part of the logistics chain? With an established relationship, the DE and retailer should be able to work out a deal where the material can be shipped to the customer through the retailer.

    It’s great in theory, but rarely does it work out like that. Let me give you an example:

    I watch the contemporary women’s apparel market very closely, with a focus on California brands. Premium denim brands, high end casual wear. Brands that you might find on shopbop.com, revolveclothing.com, goclothing.com, etc.

    Many of these brands are built upon the success of celebrities. They start off the brainchild of someone with connections, a celeb wears the item, and it becomes the next big thing. Usually, their websites start off as directories, pushing them to the retail stores.

    But then there are companies like damnbrand and efashionconsulting that specialize in creating B2C websites for designers. They handle everything, photography, merchandising, distribution, order fulfillment, payment, basically they just take a chunk of the sales for their work. The manufacturer gets the benefit of the internet branding and distribution, can show their whole line, sure they pay out a huge chunk, but they are still getting more than wholesale (in most cases). So they never HAVE to develop a competency at B2C selling, there is an industry of consultants and third party vendors who will gladly provide the full service, or turnkey operation.

    Many brands don’t start out this way, they evolve into this business model. But a retailer, well a retailer has to deal with a variety of manufacturers. While some direct people to the store, most don’t because they don’t want their competition shopping their store list.

    If clothing manufacturers were really GOOD at that, then retailers would love it, the problem is that many are not. If you were to develop that business model, you would really need to push it and make sure retailers understand it. In fashion, where seasons are short, it becomes difficult to direct consumers to stores to buy styles they may no longer stock (or the retailer may be difficult to purchase from). DEs/manufacturers realize this and sell directly to the consumer, because at the end of the day, they want to sell their product.

    and something I saw recently in LA.. a young designer has her moniker on her LABEL as a dotcom.How cool is that!Her company name is like xyz.com or something. Makes it simple. The buyers can’t do a thing about it..

    It is very cool. But you said retailers can’t do much about it, and they can, they can simply not buy the line. They may not say why, but I have had two sales reps that I work with that have had their DEs take the dot-com off of the label because the retailers did not want to buy it.

    I think sometimes as DEs you have to take a step back and put yourself in the retailer’s shoes. Retail is a tough game for stores and anything you can do to HELP them sell is great. But anything that they perceive as hurting their sales is a negative, and unless you have a hot brand with a high sell through, they don’t have to deal with it. They have a fixed amount of dollars and all things being equal, they might choose to stock a good brand that doesn’t sell to consumers over a good brand that does. Unless you have a given, must have, hot selling brand, yours is always in competition with another brand for the retailer’s dollars.

    The bottom line is that there is no one way to do this. Some companies will not face a problem selling to consumers via the web, some will. It all depends on the market they are in and the types of stores/buyers they sell to. Having said that, it is something to consider and it is something that could impact your line. Many buyers won’t volunteer the information that the brand sells too much B2C, so it’s up to the DE to get the feedback from their buyers. If it works for you, it works. But that doesn’t mean it will work for everyone.

  8. Cinnamon says:

    Thanks for the info Miracle. It’s a huge-clarification point and it fully lets me see things from the retailers side. My business name is Poise.cc so this will always be on the tags I sew into my bags so I can’t completely remove it ever. However it is subtle enough that the average shopper won’t recognize it as an url (good and bad in this case). I read somewhere early on to ask if the retailer would be keeping the DE’s hangtags or replacing it with their own. I make my hangtags as informative as I can without being gigantic so I obviously want them to keep that on the bag to increase customer’s info about the bag. Once I redesign my tag, I’ll put up an image on my site about it and add it in the comments here.

  9. MW says:

    Honestly, Cinnamon, because you have an uncommon domain extension (.cc), and you’re in the US, I don’t even think most retailers will realize that it’s a domain name (unless it has www in front of it).

  10. The battle of retailers vs manufacturers

    One of my posts sparked an exchange as follows: As a retailer, I generally won’t do business with manufacturers who will sell directly to the end user. I have no reason to -there are too many other companies out there…

  11. JESS says:

    This is probably one of the most informative and interesting topics for me right now. I do all one-of-a-kinds, doing it all myself, but was recently enlightened to the fact that I’m already doing at least 80% of the work it takes to take orders, and have my designs produced. I am waiting to receive Kathleen’s book, which I’m sure will help answer a lot of my questions…but let me pose this one. What is the consensus on DE’s having a line that they wholesale, and then have other items on the website. I’m really interested in doing a wholesale-only line, but still doing my specialty pieces…I know, its probably more than I can handle, maybe so, but I am still trying to figure it all out. I’m realizing that I don’t have enough knowledge or money to sell/market everything myself and ever make profit, so the question is do I plan to go wholesale only, or a mix of both? To me it seems like it would create mutually beneficial relationships if there is a line which can only be bought in stores, and a line that can only be bought on my website. I’d love to hear thoughts on that…

  12. Kathleen says:

    What is the consensus on DE’s having a line that they wholesale, and then have other items on the website. I’m really interested in doing a wholesale-only line, but still doing my specialty pieces…so the question is do I plan to go wholesale only, or a mix of both?

    You’ll find a variety of opinions. Many people start out doing retail, producing piece by piece. Some still are and doing well with it. I think most people gravitate toward wholesale, it’s less aggravation having to deal with onesies twosies. There’s a third possibility. One of our people started at retail, then moved to wholesale but now wants to start a smaller inhouse unit producing smaller specialized lots, more exclusive items. While it’s not full circle back to onsies twosies, it makes small lot production and enjoying the creativity the opportunity provides, more profitable.

  13. Suzanne says:

    I was thinking a way to make it work would be to have exclusive colors or fabric patterns sold by specific retailers. That way, you can still sell, but you aren’t competing with them. I guess it depends on what you make, but I think it would work for what I do.

    Right now I don’t wholesale. I don’t feel I’m big enough yet for the headache. Soon maybe!

  14. sarah says:

    This is an old and probably dead topic but what the heck. It’s late, I have insomnia so I might as well respond. My url is on my labels and I have a written guarantee to my retailers that I will not undercut them in my web prices. I also have priced my web prices so high that the retail stores are generally a discount for a customer. In addition I only have specific items at specific stores, so it is my guarantee that a customer will be steered to their store to buy the same item.

    As far as removing labels without my permission that is in the contract as well. While it’s true a consumer can do whatever they want once they buy an item a retailer cannot. My contract states they cannot alter the labels in any way. If they want to act like a private consumer than they can pay that price and not the “wholesale” price.

    There is a lot of give and take in my contracts. I offer them exclusive arrangements and in return they have to make certain efforts to sell my items. I don’t undercut their prices if they don’t remove my labels. I even offer buyback opportunities if they buy enough from me. (in truth few ever use the buybacks, the items sell before that)

    In the long run stores that were a tad apprehensive initially decided in the end my website gave them more traffic than less.

    My contracts with stores was a long, long, and well thought out legal process. I did not want to make any mistakes. And in truth, I usually am very flexible to make my stores happy anyways.

    I am a very small business who self manufactures so it allows me freedoms to do this. At the same time I didn’t want to be taken advantage of and have my labels, which at times is my only form of advertising robbed from me.

  15. vee says:

    I made Michigan products and sell only at flea markets, bazaars, etc but plan to sell on line so should I list my website for items sold at fairs.

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