Navigating the complexities of multiple distribution channels
by Bobby Berk
For manufacturers, navigating the multitude of channels consumers use to research, shop, and buy home furnishings can get tricky. Choosing which routes to use – and how to use them – can have a huge effect on your brand image with consumers, and can even cause you to run into quite a storm with your brick and mortar dealers.
My experience as an etailer, brick and mortar store owner, and manufacturer of my own lines has given me a unique perspective on this challenge we all share. As I consider the issue from all three points of view, a few rules and practices emerge that can benefit everyone.
“Too often, brick and mortar stores serve as a showroom for online retailers.”
Bobby Berk Home started out as an online-only store in 2006. Back then, it was really hard to get manufacturers to even talk to me, let alone sell to me. It took a lot of walking the shows and no shortage of pleading before I could convince them that ecommerce was indeed the future. Eventually, I was able to get a decent assortment of products on my site, but every new line I wanted to carry seemed to pose a new hurdle. So, I bit the bullet and opened a brick and mortar store in New York’s Soho district. This went a long way to allowing me to carry more lines, but manufacturers who were happy to take floor space in my store remained apprehensive about my selling their products online, because they didn’t want to exclude their other bricks and mortar dealers. One of my partners, however, did get it, and took a chance on me. Bobby Berk Home grew to be one of their biggest US retailers! Others didn’t adapt to the changing marketplace and, sadly, many of those brands are no longer in anyone’s stores.
“My longest and best partnerships have been with manufacturers who understand that they should not compete against the retailers who have invested in them.”
As I grew my brick and mortar business to 4 stores with locations in New York, Miami, Atlanta and Los Angeles, I started to empathize with the on the ground retailer’s plight. Being in very consumer-savvy markets, fighting all of the new up-and-coming e-commerce sites was a constant battle. Too often, we served as a showroom for online-only retailers, where customers would browse my high-rent square footage, shop my floor sample investments, and consult with my well-trained staff to make sure they liked the items they saw online. Then, they’d order online to save a little money on sales tax and shipping. As you can imagine, this was a really big stumbling block for our business, and we had to find a way to work with our suppliers to keep the playing field level.
The lessons I learned from this experience are now my three top pieces of advice for maintaining a healthy multipoint distribution system:
- DO NOT sell direct to your consumer. The only thing that frustrated me more than losing a sale to an online retailer was losing it to the manufacturer’s website. Suppliers that push you to invest in real-estate and floor samples – and then compete directly against you – are not partners. Consider them carefully. I have seen too many companies use brick and mortar stores to build their brand, start selling direct to the consumer online, and then open up their own stores down the street from their most successful retail partners. My longest and best partnerships have been with manufacturers who understand that they should not compete against the retailers who have invested in them and gotten them to where they are today.
- Mandate MAP Pricing and ENFORCE it. I used to spend hours at night scouring the web to make sure online competitors weren’t selling below MAP. This ensured we didn’t have to deal with the frustration of price matching or losing a sale to someone who wasn’t following the rules. We’ve dropped many manufacturers whose failure to enforce their MAP allowed online retailers to obliterate us with lower pricing. And we weren’t alone; many of those manufactures destroyed their businesses by losing the majority of their brick and mortar stores while contributing to the bad rap ecommerce stores have developed in our industry. The brands that have enjoyed a healthy mix of bricks and mortar and e-commerce are those that make sure online stores aren’t undercutting their on-the-ground partners.
- Give preferred pricing to bricks and mortar stores. I can’t count the number of times a manufacturer made the claim that I wouldn’t lose any business to their e-tailers, because my customers would appreciate the in-store service they received from me more than the buck or two they’d save on shipping and sales tax However, my experience is that money talks. A savings of a few hundred dollars can bury any guilt they may feel for wasting your sales team’s time. By giving your bricks and mortar stores preferred pricing, you give them the flexibility to discount a sale when needed, and still pay their rent and labor costs. Plus, you gain a good amount of goodwill.
I hope these three tips can help all of us maneuver the often tricky process of profitably reaching consumers via multiple channels. Of course, there are many other methods we can use to make sure all parties find a respectful balance in our rapidly changing marketplace, including mandating different shipping costs for online retailers, and showing bricks and mortar retailers how an online presence can drive traffic to their stores. Many other ideas can surely emerge as suppliers and dealers seek mutually beneficial solutions when we meet at Market.