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Target Sends Letter to Vendors Over Comparison Shopping

January 25, 2012

Showrooming is the latest Internet term to describe consumers coming into a retail store, seeing the product in person and then going online to purchase it from a competitor generally at a lower price (and in many cases without sales tax). This is a real problem for many retailers who maintain the cost of brick and mortar stores only to act as a showroom for Internet retailers who do not have that cost.

Monday's Wall Street Journal reported that Giant retailer Target has sent an "urgent" letter to their suppliers asking for help in this growing problem. The article mentions companies like Best Buy and Barnes & Noble as obvious stores who are being hurt by companies like Amazon and other online retailers.

Also affected is the independent furniture retailer who doesn't have the clout of Target, but definitely has the exposure to Internet sales. Pre-Internet sales, factories had a distribution model that many times would give a retailer an exclusive in their trading area. But with the Internet, the pricing from outside markets makes this comparison shopping much easier for the end consumer, and could potentially drive down prices, margins and ultimately storefronts.

The article indicates that the showrooming trend is likely to continue because online retailers have a much lower cost structure and many times do not collect sales taxes. Additionally consumer preferences are heading online. Look no further than the failure of the Borders chain last year at the hands of the kindle and other online book resources to see where retail could potentially be heading.

Target is asking its vendors to work on solutions to help Target remain price competitive with things like private label products. Most independent furniture retailers do not have that clout to have their own labels.

The solution for the furniture industry is complex, but needs to be discussed just as Target is discussing with their vendors. Consumers are going to the Internet and shopping. That horse is out of the barn. The question is will the independent furniture retailer eventually follow the booksellers into oblivion to likes of the IPad.

The big difference furniture has over other industries is the fact that it is a very fashion oriented product that most consumers want to see and touch. Logistically, delivery, personal design service, and professional floor sales reps can also mitigate the migration to the web for purchases. Furniture shopping can also be an enjoyable experience if done properly.

This discussion will play itself out in many different retail industries as independent retailers fight for survival to the ease and simplicity of online shopping. It will be interesting to watch the solutions that Target and other big box retailers develop with their vendor structures. Beefing up an online presence and offering a local pickup or delivery option could be one point of differentiation for local merchants. Providing a MAP price (minimum advertised price) is another.

Let me know your thoughts below.

Good selling,
Mike

 

Posted by Mike Root on January 25, 2012 | Comments (20)

September 26, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
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September 25, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
Yug commented:

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February 14, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
Cep commented:

I am late to this blog. Remember when NC back room dealers sold millions of dollars of lines like Henredon and Thomasville over the 800 numbers. Many of these tram shippers had no product on their floors. Ever heard of murderers row in Hickory. Plato Wilson is in the Furniture Hall of Fame because of this. Now we have the Internet. The way to control it is to control your distribution!!! Home Gallery in Richmond is not an Internet retailer. He is an Internet whore! Big diffence! Mike, people do not find shopping for furniture a pleasant experience. Ever heard of Black Lion in NC. They have a fake store. Want to buy Century furniture cheap, Kincaid cheap, or Stanley cheap. Go to Belfort Furniture in Dulles and get a price and call Black Lion. You cannot buy an Apple product cheap on the Internet, or David Yman, or Streless chairs. Why, because they have mAP pricing. Figure it out folks.


February 3, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
Mark commented:

To Ken Starr.... You are a funny guy. A spare bedroom of a house? Really? Open your eyes my friend to these internet stores like just to mention CSN(Wayfair), Home Gallery, and Cymax who employ more employee's then your business ever could imagine. That's right our companies employ hundreds if not thousands of employees per company. We do not operate out of spare bedrooms in our houses. Our Taxes dwarf yours in comparison along with our cost of insurance. I do say though that there is every once in a while those couple guys operating out of there garage but is that not called the free market and does the constitution not stand for that? I'm guessing you are all in for bailouts and Govt handouts as well. Can people not have the opportunity to grow a business? I'm sure you had to do the same at some point in your life? Your funny though for mentioning that. Our offices are multiple floors in office buildings if not whole office buildings themselves. SO, again i thank you for the laugh my friend. Also, we do have to provide warranty support and do so every day because manufacturers will shut our accounts if they hear that we are not servicing our customers properly. Companies like Montage help us to continue the warranties even after the delivery for years to come. So once again i appreciate the laugh. Oh, and 1 final thing. The customers do get to feel and see what they are buying. Especially since we can send them samples of virtually any piece of furniture in the entire world. The new age tech crowd loves how we work. Internet is here my friend and if you don't adapt i am sorry to say but you will be gone. Brick and Mortars are nice but Internet is where its going these days. Thank You for the laughs. I do appreciate it. By the way open an internet store and enjoy. You can get a web guy for the same amount as a sales man and he can make your profits soar! Good day!


January 31, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
Ken Starr commented:

To my friend Thom.....I certainly hope you have succeeded in conning yourself into believing that line you spew forth....unfortunately the rest of us know better.....a 20000 ft store ain't a walmart.... and even being debt free like myself the r/e taxes and insurance are a challange themselves alone...how much are the taxes on a spare bedroom of your house?....how much does the trucker pay for his equipment??...and yes we pay shipping also...so lets get real...the internet cannot survive without brick and mortar as the consumer still wants to see it and feel it before buying....then the "I" boys sell something they never have to deal with....no warranty service...usually no address etc....I wonder what the BBB thinks of a racket like that?....get real pal....brick and mortar was around long before the Internet so we don't need them to survive...more like visa versa....waiting for your response....


January 29, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
Mike Root commented:

Obviously I touched a nerve based on the level of comments. Because there are so many I won't comment on specifics but give additional general comments as a response.
1. I do not believe the furniture retailers are an extinct breed. There are very sharp operators who provide destination venues that their customers enjoy going to. They provide valuable education and solutions to their customers problems. Their customers may do a significant amount of time pre shopping on the Internet, but they will buy from the store.
2. For a retailer to survive some form of Internet strategy must be employed and those that ignore it do so at their own peril. The Internet first and foremost is a media, a very powerful media, that retailers cannot ignore.
3. Manufacturers need to be aware of what selling to one company versus another does to their distribution policies whether or not that company sells as a brick and mortar, Internet only or a combination of both.
4. Internet only retailers provide a valuable alternative to a segment of the population whether a brick and mortar store wants to admit it or not. Look at their best practices and figure out how to incorporate them into your business.
5. As several pointed out, the industry is going through lots of changes much like any other industry. There will be winners and losers. The winners will be the ones that position their companies to offer the best solution to their customers problem and deliver that in a timely cost effective manner. If it is on the Internet or in a store will be determined by the the customers perception of value.
Thanks, Mike


January 29, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
$$$$$ commented:

Fritz- to answer your question. $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$ & they will step over dead bodies for the $$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$$


January 28, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
fritz hansenn commented:

egg chair still made by original company why is it the the editors
dont know this is a rip off copy still made and was designed a long time ago.your publication is promoting a rip off copy of an existing in prod design yet you show it as if thats ok to say ......copy anything we will do no homework on the design we will just promote our advertisers product regardless of infringement on design and still show a copy. 4 hands should do their own designs stop copy cat design.


January 27, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
Jim commented:

I've instructed sales associates to bring the customer over to the computer and check the internet before letting them leave the store to go check prices.
My attitude is "why not". They probably won't find the exact piece on-line anyway and if they do just include the shipping costs and you're probably very close to your retail price. But, what you've done is take them out of the market.
Most customers see the internet as the last word is best pricing so why not capitilize on that?
Just a thought.


January 27, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
Mark commented:

Manufacturer's bring the feeling to consumer using fabric swatches and material samples. You can get a feel for what the customer wants soft or hard cushions, real or not real woods, so on... It happens every day. Never had a disappointed customer to this day with how we have conducted our E-tail business... Customers love it. Best of luck to ya!


January 27, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
THOM commented:

Mark,

Not just our industry is dealing with this issue.

Without talented sales people and showrooms, the internet stores cannot survive on pictures/price alone. The consumer wants to feel and see the product upclose.

Lets face it, the Internet and retail stores must find a way to co-exist. Neither one can survive by itself.


January 27, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
THOM commented:

Mark,

Not just our industry is dealing with this issue.

Without talented sales people and showrooms, the internet stores cannot survive on pictures/price alone. The consumer wants to feel and see the product upclose.

Lets face it, the Internet and retail stores must find a way to co-exist. Neither one can survive by itself.


January 27, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
Mark commented:

So.... Here we go. Brick and Mortars complaining about the internet again? Yea I get it but actually when I think about it I don't... See the problem lies with the brick and mortar stores themselves. You have these grand showrooms and building as big as Walmart and you have to finance them and get loans to pay for them. So right off the bat you are stuck with big debt. But to level that debt off you get furniture way below cost of any internet retailer could ever imagine. How you ask? Well for starters you get truckloads brought to your warehouse. When you order truckloads/containers of furniture you instantly get huge discounts. Then if that's not enough guess what you don't have to deal with that we do... Drop Shipping every single order and having to pay the cost of shipping on every order... We don't truckload furniture to one place. We send it nationwide and sometimes across borders. We have to be able to cover these prices. So instantly we have to sell the item at a higher price. The showrooms can say well no you don't but how could you logically say that? Brick and mortars choose themselves to charge these ridiculously high prices to try and get that 1 sale that puts cash in their pockets when actually with the costs and margins that there dealing with eventually bankrupt them. Don't complain about the internet beating your price when your charging customers retarded margins that don't even make since. Lower your prices and beat ours. It can happen very easily. Stop buying insanely extravagant showrooms and throwing huge parties and buying yachts and mansions and live within your means and sell furniture at a reasonable deal to the consumer.

If these brick and mortars started to adapt to the changing times and hire a web guy to come in and build them a website then you could blow our prices out of the water and get fat and happy in your pockets all day long. Is that so hard to do. More people are shopping online these days because of rising gas prices and because they don't want to deal with a hassling salesman and they would rather not break their bank accounts. When times are changing what should you do adapt or get left behind?

The old approach to the store shopper is gone. Furniture companies our loving the internet industry. They see the potential. Yes with every industry there are some E-tailers that violate policies and sell furniture way below what they logically should but we all know what happens to them and what is happening to them. They shut down because they can't operate on zero profit. They can't just go get a loan or a huge investment like the brick and mortars can to stay in business for another 10 years. They have nothing to show for it but a computer and some employee's. The E-tailers that our doing it right though and that are abiding by all policies and local, state, and federal laws should not be punished.

You say tax the internet... Really? That is the most ignorant thing you can say. Sure tax the internet but buyers are still going to buy from us because that is how society is changing. Buy 2015 25% of all furniture sales will be online. Buyers will still get cheaper prices and they will love having the furniture show up at their door step without having to deal with a nagging sales man. If the Govt taxed the internet it would never pay back the federal deficit and it would never help the country. Why you might ask? Because they also enjoy throwing extravagant parties, buying Taj Mahal like buildings to run the Govt, and having the best retirement plans in the history of the entire universe. Taxing the internet will only increase the pockets of the Politian's...

In my closing I must say don't knock down the internet companies for what they are doing. There are some brilliant minds in the industry and they are making real change to the way people shop. There are lots of consumers that do not have a local store and that is the majority of our shoppers. Times are changing. The younger generation is focused on the internet and that is where all the money is beginning to be made. Brick and mortars need to adapt to that industry. Down size your buildings and turn on a computer. There is a thing called the Internet and it's not going away.


January 27, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
THOM commented:

It is great to see that a corporation of this size is finally complaining of an issue that long plagues our industry. We need to protect the "brick and mortar" furniture stores while embracing the new world of the internet shopping experience. Some ides that I would like to be implemented:

1. Internet sales tax on ANY and ALL purchases. The government complians that they do not have enough money from us the tax payer while millions upon millions of potential tax dollars float through the air.

2. Internet companies should pay higher costs for the goods sold to them since their overhard is much less than the retail stores.

3. Manufacturers should do a better job in protecting their retailers with regards to distribution, drop shipments, etc.

4. MAP policies need to be implemented and enforced. Protect retailers while punishing those who cause distrubtion to the marketplace.

5. Protect brand names and or create private label brands that make it harder to use the retailers floors.

6. Determine if you want to be an internet manufacturer, "brick and mortar" manufacturer or a mnaufacturer that sells to both in a logical and thought out plan in which both can co-exist.

If we kill the "brick and mortar" retailers, I doubt that consumers will purchase a sofa, bedroom set or mattress just because of a pretty picture and good price.


January 26, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
shea atet suger commented:

Paula donut bacon deen a symbol of lies and poor judgement
how many millions sucked up her butter balls while for 3 years she had diab/type 2,now shes a spokesperson for a drug company that promotes drugs not diet and drugs not obesity/look at paula/she is a fit healthy example of branding icons that are not about furniture but all about the brand. sugar coated and fried in bacon egg,on face....


January 26, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
quin chao fat commented:

mikey jacksons armoir please spare this dribble,25 g for a rented prop in a hm he rented for 8 mo.s this is why the industry is going down tube...ken starr is rt on money ...sell real goods and stop this craziness soon or brick and mortars stores will all be called wal-ikea-ashley marts inc


January 26, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
Mike Kensington commented:

So truth be told. Now what? Complain? Do something about it! Start supporting the honest ones. I'll tell you, I ran across this blog, website, video what ever you call it. Buy Furniture You Love.org, there is something there. We know the cancer, yes it is spread, but now you've got to begin to heal it, if you can.


January 26, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
Ken Starr commented:

My hat is off to Target for addressing this new form of cancer in our industry. Again this is greed on the part of the manufacturers as they see big opportunities to market without ever having to worry about warranty problems....how can you complain about product problems when you have no idea where it is coming from???... of course they show up at the stores looking for assistance even though they looked at it but didn't buy it there....and of course if we don't handle it we are bad guys....and you wonder why at least 50% of the stores gave up and closed their doors....yeah right!! I have seen this cancer eating away at my customer base and am getting fed up. Its damn well about time that we start running this industry on good sound business practices rather than MBA greed and corruption. Otherwise there will soon be very few stores to see product....and your internet buddies won't have the advantage of using other peoples time and hard-earned stores to leech off of....or maybe we should try to get the store owners to unite and start charging a fee of say 100 dollars to shop at their stores that would be credited to their purchases so as to ward off this practice of sneaking around. Take heed!....between internet sales and buddying up with liquidators this industry is short-lived at best....and thats all I will say about it!!


January 25, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
Roger commented:

Failing retailers = failing manufacturers as this is clearly evident across our country. Most furniture shoppers would much prefer to shop the best brand names that they are sure of the quality. But brand names are being diluted/ dropped/ added/ copied so often and this leads to confusion and ignorance in the market place. Also, many retailers are shopping overseas to find lower price points, thus by-passing domestic manufacturers. To many sales reps are stuck in the way "it used to be".
In the next 5-7 years their will be major shake-outs in the furniture manufacturing/distribution channels. These new leaders in the furniture industry will look nothing like what we are seeing today.


January 25, 2012
In response to: Target Sends Letter to Vendors Over Comparison Shopping
Robert Mark commented:

"The big difference furniture has over other industries is the fact that it is a very fashion oriented product that most consumers want to see and touch. Logistically, delivery, personal design service, and professional floor sales reps can also mitigate the migration to the web for purchases. Furniture shopping can also be an enjoyable experience if done properly"

Mitigate you say????????? Tell this to the carcasses of the failed retailers both small and large that the likes of Furnitureland South and its predecessors from Johnny Blackwelder onward destroyed when their golfing buddy manufacturers didn't give a hoot about the profitability of the retailers across the country who supported them with investments of floor space, inventory and advertising. The manufacturers destroyed the fabric of distribution before this current Internet trend with apps for comparison shopping.

In the end, only Stickley gave exclusivity for the profitability of its dealers. All the rest whored their distribution for the fast profits with no regard for the future.

The manufacturers reduced their products to a commodity level even if they were high end. And then they off shored production so both the quality and design evaporated into the current market place full of branded know nothing so called designers.

There is more production chasing not enough floor space in brick and mortar to support it. None of the manufacturers have done one significant thing to address this issue.
What will come out of this will be a totally new approach to product development and a totally new approach to sales and distribution.
Your comments just come from the now dead 20th Century suicide model. Active change, not wishful thinking will bring back the industry. Is there anyone out there who would truly like to discuss active change? I am listening.

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