Target, the US mass market discounter, communicated the decision to stores last week, and underlines growing antagonism between Amazon and bricks ‘n mortar retailers, which are threatened by the online retailer’s aggressive discounting, entry into new merchandise categories and attractive shipping service.
Target reported last November that the Kindle was the best-selling tablet in its stores on the day after the Thanksgiving holiday, typically the busiest shopping day of the year.
Target has in the past complained about the practice of “show-rooming”, a growing habit by shoppers to view a product in-store and then buy it from an online seller.
Apart from threatening the stability of routes to market for a number of key non-food categories, this move raises an important issue re the relationship between suppliers and specialist retailers.
Specialist shops viability
Essentially, as you know, the purpose of specialist shops in categories such as toys, bookselling, consumer-electronics and home entertainment is to meet a fundamental consumer-shopper need to physically experience the product. When specialists’ retail prices are so out of line with alternative formats, it is inevitable that having ‘pressed the buttons’ on a piece of electronic equipment in a specialist outlet, the shopper will invariably make a purchase online at a significant discount. There is no legal way of ensuring fulfilment of the sale by the specialist retailer unless via a price differential that is so low that purchasing elsewhere is not worth the trouble.
Even the mass retailers are under pressure from Amazon
It has to be expected that as bricks ‘n mortar specialist shops cannot compete with online providers they need help in optimising their business model. The major multiples have reached market dominance by taking state-of-art retailing to new highs, in effect becoming expert shopkeepers. In fact, these major multiple retailers have set global standards in state-of-art retailing that have redefined shop-keeping, and these standards need to be met by specialist retailers in order to survive.
Role of the supplier in helping the survival of specialist retailers
In practice, suppliers need to be retail business consultants to specialist and independent shops, helping them to adapt state-of-art retailing techniques and practices to their operations. However, as the cost of this level of service would rarely be covered by the size of the resulting order, suppliers need to change their approach to calculating the profitability of some customer types. Because specialist and sometimes independent customers are ‘educating’ the consumer and ‘show-rooming’ the product, they are in fact performing an advertising function for the brand. They therefore need compensation by way of additional margin and help in becoming more effective shopkeepers.
Budgeting tip to help specialist retailers
Should we not therefore charge say 50% of the cost of servicing them to the advertising budget, and continue to call if the remaining cost is covered by size of average order?
Otherwise find a new way of show-rooming your brand and re-engaging the consumer….
Meanwhile, have a long, experiential weekend, from the NamNews Team!