https://www.jeffharbaugh.com/wp-content/uploads/2014/08/logo_color_640.gif 0 0 jeff https://www.jeffharbaugh.com/wp-content/uploads/2014/08/logo_color_640.gif jeff2010-12-08 16:39:002010-12-08 16:45:10“Independent” Retailers; Are They Still Independent? And What if They Aren’t?
“Independent” Retailers; Are They Still Independent? And What if They Aren’t?
Sometimes I do my best work with a glass of wine. The secret is to never post what you’ve written until the next day, after you’ve read it again. I put “independent” in quotes (there, I’ve done it twice) because as I think about retailers and their relationships with brands I kind of wonder what independent means.
Independents have always relied on brands for terms to make their cash flow work. But now we’re into brands investing in or, to some extent controlling what were independent retailers. When that happens, that retailer ain’t independent no more.
But that independence is always what has made the best core (core, independent, specialty- pick your term) retailer successful. They were typically a destination in that community and they carried the brands that community wanted and the brands the store believed in. When people stopped buying, or a brand got over distributed or just when it started putting out ugly stuff that didn’t work, the store dumped it. I mean, they had to. It was their only chance.
Glenn Brumage, then of Tum Yeto , and now Director of Business Development for Wabsono International and Vice President of IASC, spewed forth some wisdom at one of those IASC/retailer morning meetings at ASR (guess we won’t be doing that any more) a couple of years ago. As usual, the group was bitching and moaning about distribution. Glenn said something like, “Hey guys, most successful brands grow up and out of specialty store distribution eventually and the store replaces them with new, smaller brands. Get over it- it’s just what happens.”
Okay, arguably those aren’t his exact words. But we all know he’s right. Not every brand, and not all the time. But I’d say that no core retailer can differentiate itself if most of what it carries is available at better prices in chains, department stores, and on the internet.
I’ve even said from time to time that not bringing in new, smaller brands is less of a risk than not bringing them in. Especially in current economic circumstances.
The action sports industry is really pretty small. It’s composed of those retailers and brands that cater to the participants in the sport and the first level of nonparticipants who are into the lifestyle and watching the sports. We (at least I) used to think we were a whole lot bigger than that. But we were confusing youth culture and fashion with action sports.
Selling to the action sports consumer, as I define it, means you better have the product they want. What happens when Large Brand X has a deal with you that requires you to carry their product which, not surprisingly, they’d rather you sell than Brand Y? But you, the independent retailer, are part of a community, which is why you are successful. And the community wants Brand Y. Not brand X.
In times past, the retailer might have ordered less, send some back, exchange it for what was selling, or said, “Shit, we screwed up ordering this crap” and put it on closeout. Now, I wonder if they have quite the flexibility to do that.
I did hear a story of a retailer this past summer that could have sold the hell out of hoodies given the cool weather but was stuck with racks of board shorts. How does that retailer keep its credibility with its customers, much less make up for the lost sales?
Recently, there was an interview in Transworld Business where Jake Burton outlined his company’s plans to support local snowboarding shops. I think I’ve got a whole other article to write on the questions I would have asked.
I’m for Burton’s efforts and am really glad Burton has seen the light. But to the extent that any of these brands (snow, skate, or surf) have a relationship with core retailers that create additional limits on the retailer’s ability to respond to their customer base, they may damage that retailer. At some point, I worry that core retailers begin to look (and act?) too much like the stores big brands are opening in malls.
For a long time, there’s been a consensus that core retailers were critical to spotting trends, creating new participants, and building new brands. If we still think that’s true, we need to be a bit cautious about how the retail environment is evolving.
Good stuff JH
I’d add that the real problem is confidence. Retailers have lost the confidence they had back in the day.
Back in the dark ages when surf was still a niche, I worked as a department manager/buyer at Hobie Sports in Dana Point. Back then, OP was the undisputed king (how many OP cord shorts, very short, did you own). At some point in the late 70’s OP decided to sell into the Department stores. Then owner of Hobie Sports, Dick Metz, (who I believe owned a fair amount of stock in OP with his friend Don Hansen) walked in to his buyers and store managers and said something to the effect of, “that’s it, we’re off OP. Cut the buy down to the smallest representation you can and move otb to newcomers Quik and Gotcha. Metz was smart, he didn’t drop OP, just made it obvious that it wasn’t as cool any more. There was no animosity, we simply moved on. We understood that it was the natural progression.
Metz also wasn’t afraid of his customers. He knew that they might be shocked at first. But he was confident that we were the influencers.
He controlled his destiny by controlling the merchandise in the store.
I think your last sentence really says it all. And I’m guessing he had a balance sheet that let him do that, fewer retailers close to him, and no internet to worry about. More like the good old days than the dark ages.
I think your informative views should be read by anyone seeking to push a new brand into an established market place. It’s so much easier trying to introduce a new brand when you are aware of the factors that affect retail outlets and you learn that here in many ways. In Australia the marketplace is under duress due to the dollar being close to parity now for the first time. Retailers were always able to justify being about $200 more expensive than american stores if someone tried to buy online when you take into the fact that our dollar was USD.70 and the postage was/still is so expensive. Now a skate banana would cost me up to AUD$950 here when i can buy it online and have it delivered within a week for say $AUD650….and stores know this will be the case before their order even comes in! Their margin on Lib Tech is also small and they are left with significant stock the major brands from last season and their orders for next season of those brands are dropping massively as a result. Small brands that can offer a good margin, guaranteed exclusivity from online discounters and come with a good reputation are essential as essential as insurance in my view. I also tell them that as a property developer, i cant wait for the opportunity to find a site in every major city to establish a Burton Superstore Outlet just as Billabong, Ripcurl etc have.
Keep up the good work Jeff
You seem to be taking the position that stores should only buy brands they can actually make money on and that they shouldn’t buy more than they reasonably think they can sell no matter how the brands try and twist their arms with terms, discounts, required minimums and other inducements! You probably even think they should focus on increasing gross margin dollars.
Bill, Bill, Bill. What am I going to do with you? I mean, if we followed your prescription we’d probably have a lot more healthy independent retailers making a living doing what they love, building new brands and getting people committed to the sports and lifestyle. What would I write about then? Don’t you have any sympathy for me at all?
Okay, sarcasm aside, I agree with you completely and you’ve said it more succinctly than I ever could. I’m not known for my succinctness, if that’s a word. At the end of the day, no retailer has any control over what big brands do. So they need to stop worrying about it and run their businesses well. Somebody who didn’t want their name used suggested that if a group of good specialty retailers (BRA, are you reading this?) got up and said, “Brand X, we’re done with you as a group unless you clean up your distribution,” and were very specific about that meant it might have some interesting results. But I won’t wait for that to happen. In the meantime, all shops can do is what you (and I) have suggested.
Sorry, but there’s nothing much I can do about the exchange rate.
Thanks for a great comment!
I believe that the world of retail has changed and with that change “segmentation” has be come a key factor when looking at retail distribution (channel) strategies. There are different types of segmentation, consumer, & retailer, but the theory is that different consumers shop in different stores. If you use apple computers for an example you can find them at Walmart and at the Apple store. I would guess that the consumer who buys an Apple at Walmart has a different social profile than the one who shops at the Apple store. Money saved on the Apple computer at Walmart would be negligible. My point is that just because a large brand is present at different channels of distribution does not change its viability to the consumer. It is the responsibility of the manufacturer to design and execute retail segmentation, product segmentation, and channel strategies to have the ability to reach all the consumers it can while keeping business healthy and profitable for all retailers that carry the brand.
Every retailer provides a different consumer experience and targets and caters to a specific demographic. It is the responsibility of the management team or ownership of that retailer to focus on the providing the right products for its target consumer. In my experience, the retailers who nail this normally succeed.
In general, I agree with what you’re saying. It’s certainly the goal of a large brand to be present at as many different distribution channels as possible without changing its viability to the consumer. That’s easy to say and hard to do. The ability to do it is probably a good measure of the quality of a management team. Of course, you can’t be all things to all people and brands who try typically get into some trouble. In our industry the big brands have pretty much decided that the core retailers aren’t as important as they were. Or at least they can’t deliver the sales growth the big brands believe they require. That’s just a matter of mathematics if nothing else.
I also think you’re right to say that the retailers who correctly identifies his target consumer and provides them with the right product usually succeeds. What I’ve written at least a few times now is that the right product is probably not the same stuff you can get anywhere all the time- at least for our specialty retailers. Of course, we’re both talking in generalities here. Each retailer has to decide which brand it can carry and make money on given its customers response to that brand and the pricing and distribution the brand has established. I just don’t want retailers committed to brands because they’ve always carried them and they are a “flagship” brand. If you can’t make money on the brand, you can’t carry it.
You might read Bill’s comment below and my response to it. I gather attendance is going to be a little sparse at ASR in January, so I’ll hope to see you at Surf Expo or SIA.
Thanks for the good insight.
Bravo. Thanks for another good one Jeff.