Dear Independent Retailer, I Demand a Discount: A Christmas Story
Remember how I told you about independent retailers have to compete with their vendors? Here is a very specific example:
First a bit of fashion industry background for the average customer who isn’t in the know. Retail fashion has traditional seasons. That are still strongly clung to even though they are really no longer relevant. Fashion seasons are Fall and Spring. Yes, there are more subcategories, but for the sake of simplicity I’m going to talk about the major seasons. We just got through New York Fashion Week. This is the fashion industry’s presentation to all the buyers for next season’s retail. After that there are the trade shows. Here’s how it works (or it traditionally worked, things are slowly and quickly changing): a buyer for an independent boutique, department store or big box store goes to a trade show and looks at miles of booths on convention floors packed with clothes, shoes, lingerie, accessories; things to buy wholesale to sell to their retail customers. In my shoe world it was two trips to Vegas each year: February to buy for fall and August to buy for spring. I made elaborate notebooks to keep appointments, booth numbers of interesting brands, notes and budgets. With all that the owner/buyer (in our case of independent shoe store) walked through all of it searching for the collection that we would present to our customers six months out. They write orders, take notes and photos. When they come home, we sort through everything looking for holes or duplicates, then make cancellations or pad orders. Sometimes sales representatives come to us, but all the orders are taken based on designer samples (luckily the owner is a size 6, and could try them on), and the companies base their decisions on what to manufacture based on the orders. This is the simple version. It’s a bit more complicated than this.
Another fun thing to point out here, is that different companies have different ways of doing things. Some orders are done by the piece, some you have to order by the case. It depends on the company. A lot of companies only make what is ordered at the show. This is especially true of smaller companies. In fashion finance is different. It is done by a factor; who is a financial institution that bridges the gap between the designer sample and the finished product. Basically, a designer takes orders, the factor fronts the money for those orders to be manufactured, then collects the money for the orders from the buyer, and disperses the money back to the designer after all the costs are covered. Some orders get net 30; which means that you have 30 days to pay after you receive the goods. It gives the chance of a retailer to sell some or all of the product to pay for it. Some things you have to put a down payment on (usually half) at the time of the order for it to be produced, and the rest when the order is received. Some things are C.O.D. (cash on demand). We (the store) pay for shipping and customs fees. On the manufacturer’s side, most companies don’t own their own factories anymore. Even if they do, they have to order quantities of materials and produce products based on orders. Every company is different, some only produce exactly what is ordered, others will base production on numbers ordered of particular styles. If a style is popular in a particular segment, say all the department stores order a particular boot, the company may choose to produce more of that boot anticipating that that boot will be reordered within the season. This is a gamble. And this is the basis of this story.
What is important to note here about fashion seasons, is that they are increasingly irrelevant. Used to be, shoppers would come to stores (department stores or boutiques) to discover what the new season had to offer. Buyers bought for their own customers. Department stores used to have their own buyers, locally or regionally. This is going away or gone. You can see a severe homogenization of department stores these days, because this has mostly been done away with to save costs. Buying is a gamble. You may know your customers quite well, but you never know what is going to be the thing to fly off the shelves. That small handmade purple boot from an independent Spanish company? There’s no chance of reordering that. They made exactly what was ordered. Maybe you might be able to get more if someone cancelled their order.
Now larger popular brand boot companies? They send us stock lists of what was available by style, size and colour; some every week, some every month. So it might interest you to know here is where our story happened, and why it sucks to compete with your retailer online.
Anonymous Famous Boot Company sends us a stock list in mid-November, and they offer a smallish discount to reorder a certain number of pairs; which we do. A number of styles from AFBC are selling really well, so we stock up. They give us a heads up that a couple of styles are going to be discounted for Thanksgiving/Black Friday weekend, and would we like to order some pairs at a slight discount to make up for the fact that because we carry those pairs, we have to put them on sale too. We don’t have to except, any customer with a smart phone will see that they are on sale on AFBC’s website, and get upset at us if we don’t price match. Okay, fine. A 20% discount on a few styles isn’t going to break us. We lose a little bit on this, but it is just one weekend. No big deal. We continue along, reordering each week to fill in the most popular styles as they sell, like usual.
But wait! December rolls around, and we get another copy of AFBC’s stock list. It is evident by how many pairs (some there were hundreds or over 1K) in each style/size/colour that were available that they had overbought. In December a wholesaler should be out of almost everything. For a fashion company, you are rolling out spring to your retailers in January. Okay, yikes for AFBC.
What does that have to do with us? Well, in our current retail climate seasons don’t matter anymore. Nor do curated collections, because so many people follow their favourite fashion bloggers on Pinterest, Instagram et al. They scour brand websites for obscure styles or colours. Obsessively. I know it was partly my fault that I did a good job on our website’s SEO so we came up high in search results when you did a search for AFBC in Portland. So people came in or called looking for this specific brand. Looking for things we didn’t have. We had maybe 20–30 styles in two colours each. Their website has hundreds. Remember it costs around $3000. for one size run in one style. We are small, and we can’t have everything. So what does that have to do with any other boot company’s website? Well, people still aren’t so enamoured with buying shoes online. Fit is an issue. Leather, style, handmade: all factors. What does it look like on an individual? People want to try stuff on before they buy it. They want to know what size they are since standard sizing doesn’t exist.
So they want to come in and have us fit them.
Why is this so problematic? Well, if you asked the owner of the store, she would tell you that this is stealing. To use her time to go pick out the shoes, her or her employees time to fit them, take up space in her store and then going to buy them online. Sometimes right there in front of us. If this sounds bitter it is. It is disheartening, it is demoralizing, and it happened every day. One cannot stay in business this way.
On the other side is AFBC’s website. What the average person doesn’t know: they don’t offer us free shipping and returns on wholesale. This means, if we can save a sale by offering to special order something for one of our customers, we are stuck with it if it doesn’t fit them. The only returns they ever take is for defective merchandise. They don’t even give us cash back, we get credit to buy more things from them. So it’s easy enough to do a special order on a style we are familiar with, because we can be confident about fit. That isn’t the case with the other hundreds of styles they offer that maybe the owner saw for a few seconds sampled at a trade show. And that it is time consuming. And that it takes time away from actual paying customers. It’s a hard decision, because is it worth it? Maybe individually, no, but everything adds up.
Now the last part of the story is this: AFBC was overwhelmed with stock, so they decided to put a lot of those styles on their website at 40% off. Some of those styles we had ordered the week before counting on selling at full price. They didn’t warn us ahead of time, or even notify us when they did this. We found out from customers. I spent many hours combing through their site to price match them. Then I spent many hours back and forth with our sales reps and their management to try to recoup some of our costs. I counted our inventory. Those items? They accounted for 20% of our stock. Remember, we independent retailers are small. There is some cushion, but this is a big hit to our bottom line. Combine the time wasted on people looking for fit, but not buying, research and all the back and forth with the company. In the end they gave us nothing. We were refunded the difference of the sale price on 5 pairs, and were allowed to return one style for credit. Credit to purchase from them again.
The moral of this story if there is one, is I want you to be aware that this is happening. Every time you demand a discount from a small business, it is coming right out of their pockets. We gladly gave discounts to our regulars, and people who were nice to us. But please, look at what you are asking for. Wasting the time of a small shop owner, and never buying anything is not only detrimental to their bottom line, it is demoralizing as well. These are the sorts of changes that brick and mortar businesses of all sizes are facing. Again, if you want to see small shops stay in business buy something from them. Write a positive review. Tell your friends. There is something to being able to go into a shop, pick something up, hold it in your hands, try it on, and be able to buy it right then and there.