Retailer: Net presents threat
Last week, I got a letter from Gary O’Reilly, owner of Park Avenue Home Furnishings, an Illinois-based furniture retailer. With over 30 years of furniture retailing under his belt, he’s lived through lean years and fat ones. He’s not a bird whose feathers ruffle easily. However, the tone of his letter made it clear he was distressed.
Gary wrote to mourn the loss of eight large Chicago-area stores. “Ray, in the last four weeks alone, the Chicago area has lost eight large stores — six Bay Furniture stores, Devincen’s and Zierks.”
According to O’Reilly, three more well-established retailers may meet the same fate soon. A big part of the problem, he believes, is the deflation associated with imports. “We all know how much the imports have hurt our volume. Four years ago, I shipped $8 million; this year, I’ll be lucky to hit $4 million,” he said.
The other culprit, O’Reilly said, is the Internet. “Today, customers use my salespeople’s time to educate themselves about the product, write all that down, then shop the Internet.”
But his issue is not so much with the Internet as it is with furniture suppliers: “I believe that if the customer did not have my sales floor to shop from, they could not, or would not, order online.”
I asked O’Reilly if he had a solution. Without missing a beat, he laid out his idea: “If the furniture suppliers would come up with a simple dealer agreement that gave a 100-mile radius for retailers to sell their goods, it would put all of the retailers on an equal playing field.”
He stressed that he’s not asking for an exclusive territory. “I would be thrilled if suppliers said each retailer had to have a brick-and-mortar location, would get a 100-mile, non-exclusive radius and could not sell their goods on the Internet. I can deal with the buying clubs and the Costco’s. What I can’t compete against is a guy with no overhead stealing sales he would not be getting if the customer did not have us full-line stores displaying the goods.”
Here’s the O’Reilly challenge to suppliers: “We need one good furniture company to start the ball rolling and help us stay in business.”
Any takers?
Gwenelda commented:
I cannot tell a lie, that raelly helped.
Luckie commented:
Holy cocsnie data batman. Lol!
Diane Burley commented:
The retailers whine that the Internet is causing them to lose sales, the manufacturers cry that the Internet helps pirates steal design.
The industry has to grow up and begin acting like a business and not a cartel. How do Nike, Rolex, women's ware stay in business -- when Canal Street offers a hoarde of knock-offs for a fraction of the price.
The secret for every other industry is branding. Investing in a brand means building equity in your name -- if your name worthless -- or unknown -- be you dealer or manufacturer -- you have not added value to the products you sell for your customer. Hence price is the only way you can compete.
Consumers should not be forced to deal with an irrascible dealer merely because they live within 100 miles of him. They will go to the dealer that answers their needs -- be it price, service, design expertise, honesty or integrity.
The Internet is here to stay. Consumers love it because it allows them to affirm their buying decisions, find products not generally carried in their own markets, and create buying relationships with people they choose to -- versus whom they are forced to.
We cover Kitchen & Bath, in addition to furnishings on our site purecontemporary.com -- and this subject is NEVER raised in that industry.
Gonzalo Latorre commented:
Dear Ray,
First of all, I want to thank you for being always motiviting us with your insteresting articles about our "crazy-lovely" industry.
I've being in love with this industry for the last 21 years, half in a furniture store and the other half as a Sales Representative. So I know both side of the fence.
Regarding the comment from Mr. O'Reilly, is absolutely true, but we face the well known problem, who's first, the chicken or the egg ? The manufacture is not protecting the retailer simply because the retailer on their hand is bring direct containers from China. And the worse is that many of them are bringing containers full of products to re-sell them to other furniture stores.
I think the agreement that Mr. O'Reilly mentioned in your article is simply base on two words: Loyalty and respect.
Gonzalo Latorre
Wickline Bedding
Regional Sales Manager
John Nichols commented:
Dear Manufacturer
If you don't protect your
retail channel of distribution;
who will? Your company won't
exist if you think your product
will be enough to protect you
from failure. A true dealer base
is very valuable, a list of
people you once sold some
product to is just that. Dealer
base is a thing to care and feed
constantly. I hear the same things we experienced in other
products in the 60's and 70's.
Retail will ajust, will you be here when that ajustment is done.
Yes the internet has changed the world, but some things always remain the same, if you
think your dealers can't fire you because you are a "MajorBrand" or you have the best value, get ready to close.
When dealers are telling you that you need to listen and you don't, then inertia ends and you are replaced. It is not the retailer that should protect your integrity in the market place it is you. Yes you can build a true dealer base and you need it yesterday . I have a few smart suppliers and I will find more, every country has them and the internet cuts many ways.
If your are a smart one let me know.
Regards
John
Rick commented:
Mr. O'reilly - shame on you for ever losing a sale to an online retailer. I suppose its easier to point your finger at the web than to take a critical look at your own business. I suggest you tighten your belt and adapt to the reality of todays furniture world if you wish to survive. I have found that most consumers give their local retailer a shot at their business. Many are forced to the Internet because they aren't treated properly, can't find what they want, can't find a competent salesperson or simply can't afford to buy at the price that is being charged in your store. To try and force todays savvy consumer to buy from a select group of retailers at an inflated price would be a big mistake. Every brand of furniture thats worth selling already has an internet policy and most require a physical store presence as well as minimum floor space. So to stereotype Internet retailers by saying they have "low overhead" is wrong. Most successful online stores spend a small fortune promoting the brands and product categories that they sell and in addition they do have brick and mortar to back up their operations. Today's consumer is very comfortable shopping online from simply a good image and well written copy. If a company in another state can pay "White Glove" transportation rates and deliver to a customer in your own back yard for less than you're willing to accept then once again "shame on you". If I were you I would adapt to the change instead of trying to convince everyone to hop in a time machine and travel back to 1950.
Neil Doherty commented:
There is a lot to be said (and think about) for what Mr. O'Reilly says and what Donna adds as a comment.
And, I am sure that there may be more added by others.
I do not know if anyone has ever really studied what is being offered over the Internet. By this, I mean if there is a large presence of new models of the major name brands that are being sold much below prices that are offered in brick and mortar stores. If this is the case, then Mr. O'Reilly makes a good point in his request for teritory.
But, I would imagine that looking at the Internet you may find that much being sold is older or discontinued models and damaged pieces (that may have been repaired.
A problem that will be persistent is what Donna touches on - That is, there is much that can be sourced directly, not just by retailers, but also by the Internet marketers. And, as the pieces are being made offshore, there are many pieces offered that are much the same as what is coming from the name brand manufacturers.
The problems for anyone to source offshore are with delivery, quality control and the fact that one must be willing to take the marketing risks of having pieces that simply will not sell (and anyone that has had stock knows this problem).
For a brick and mortar retailer, the rent, advertising and all other overhead expenses leave little (financial) options to carry much of an inventory, and to have to deal with the logistical problems that come with sourcing from overseas. This may be easier for an Internet marketer that may be stocking and shipping from a low cost warehouse.
Ray, as you may recall, I often remark in my comments that this is an industry still evolving these days. It may take a number of years before it settles into some overall pattern. For now, what I would suggest to Mr. O'Reilly is that he consider a compromise in his marketing. Perhaps he can cut back on the size of his retail store(s) and set up his own Internet web site. Perhaps even using the website under a different name. He could sell his own slow movers, or even get in on buying the discontinued pieces from his current suppliers.
There are people that do want to see what they are buying, and will feel more comfortable buying from an established, local retailer. But, there are those bargain hunters that will do as Mr. O'Reilly states (using his people for information, then looking for a bargain on the Internet). So, he might get ahead of them by establishing his own web site, and advertise it locally or list it on the search engines as making deliveries to his locality. And again, under a different name, he will not get the reputation as a discounter.
wax@stepup.com commented:
"It's all about the brand." Furniture retailers can turn this around and fight fire with fire. The Internet can be used to drive traffic and turn online shoppers into store buyers. The retailer needs to partner with manufacturer suppliers who promote their brand through online syndication, and deliver to them consumers who "are ready to buy." Research clearly shows that people ( >98%) prefer to buy high ticket items from local merchants. They do so after doing their research online, within one week of doing their homework in their pajamas on the Web. Embrace the latest technology, support the suppliers who want to build thier brand and yours. My company aleady does this for manufacturers and retailers across several industry verticals.
