Are Vendors Killing the Industry?

In this two article Point-Counter Point, we discuss pricing, online shopping, direct to consumer shipping, and the future of the industry. Our customers are already omni-channel shoppers.   How do we adapt as an industry to best serve the customer and ensure industry health? Article 1 argues that vendors are acting in a shortsighted manner. Article 2 will argue that retailers are falling short and need to step up their game(s) and outlines six actions that need to start and/or stop happening so that the specialty running industry can adapt to the realities of customer behavior.

Part 1:  The Vendor

In the last 2 months, I’ve made several running related purchases, including 3 pairs of shoes and a jacket for my sister-in-law. Many of my shoe purchases in the past year have resulted from secret shopping excursions, but in this case I was shopping strictly for my own needs, as a normal customer would.

My every day shoe was updated this fall. I purchased one pair at a local shop. The individual who helped me was unsure of the price for the new model, and had 1 older one at 15% off, but in a ½ size bigger. They were also unable to tell me what changed with the new model. The new shoe felt a little different, but I bought the new one from the shop because I feel like I should support the local business, and I assumed the shoe would feel fine once I started running it. However, I also decided to go hunting for the old one to make sure I had a backup. I found a few options for the old version, which originally retailed for $115:

·         RRS: $79, free shipping

·         Holabird: $67, free shipping

·         Vendor Website: $76, free shipping

·         Local shop (in a couple of sizes, not mine): $97.75

What’s the problem here? I can make the purchase directly from the vendor for 22% less than the retailer. For a once a year customer, it might not break the deal, since they are also less likely to know of the update schedule. However, for customers buying multiple pairs each year (who could be a great customer for the local shop), the incentive to seek a better deal is much greater.

My other purchase was a Christmas present. I bought my sister-in-law a High Visibility jacket, which retails for $85, as a good layer for the Pennsylvania weather. I went to a different local shop, trying not to play favorites, and they had 1 in the size (small), but not in the color I was looking for. On Sunday, I checked the Vendor website, and they had the color I wanted for $55, in small, with free 2-day shipping.

Again, what’s the problem here?

In both cases, I was happy that I was able to save some money, but felt guilty for not supporting the local stores. However, I also had bought “old” product (I assume the vendor is phasing out the color I bought), which I feel was appropriately discounted. In the case of the shoes, they arrived in 3 days. The jacket, with free 2 day shipping, did not ship until late Monday night (so Tuesday morning my time), and did not arrive until Thursday night. So 2 day shipping was 4 day delivery. I would have preferred to buy the jacket at the store on Saturday. Or, alternatively, order from the store on the spot. However, neither of those were presented as options.

Currently, vendors are undercutting the retailers and attempting to play in the direct to consumer space. This requires them to be set up to support two distribution channels and results in taking share from the retailers who introduced consumers to the product in the first place. I switched to my current shoes after trying them at a local store. I determined my color preference for the jacket while comparing them in a store. A vendor can sell the jacket for $55 and get a higher margin than by moving that same jacket through retail, but they also had to pay for their distribution infrastructure, and shipping.

Vendors face tough business dilemmas.  How do they unload products that have reached the end of their lifecycle?  Where do they turn?  Usually, specialty retailers want the latest version, not last season’s.  Selling direct seems palatable when facing an overstock of a style that retailers don’t want anymore.  However, what will happen to the vendors if they run the retailers out of business? A business model without retailers is not sustainable. It would be great in the short term for vendors and consumers. Consumers would have somewhere to see the product, and somewhere to buy it. Vendors would have retailers to introduce product and position their brand. However, the whole business model breaks if you take retailers out. Then there is nowhere to find the brand, see the product, and decide to buy. My purchase decision was made in the store, not at the vendor’s website. I was prepared to pay $85 for the jacket in the store. If the local store is not there, where do you see the jacket? Where do you pick it up and feel the difference between a high quality jacket and a cheap jacket? Where do you feel the difference between the latest shoe and last season’s model?

Vendors need to support the retailers, not undercut on price, and provide resources so that the retailers are educated in product and options. They also need to provide a way for retailers to access product that they don’t have in current inventory and get it in the hands of their customers quickly. Additionally, there is no excuse for the manager of the local store, who manages the store’s footwear inventory, to not know what has changed with a new model of one of Vendor’s best selling shoes. Who dropped the ball? Did the vendor provide them anything? Did they provide materials, a visit from a tech rep? Possibly, but if so, their delivery is broken. Do they want me to keep shopping at the vendor’s website or at the local store? Now that I know I don’t love the new model, how should I find my new favorite shoe when I run through the old ones I purchased? It’s back to the store.

Stay tuned for Article 2 when we discuss the running retailer’s role in omni-channel customer behavior, and read what vendors can Start and Stop doing today to improve the current and future health of the both themselves and retailers.