Many retailers feel they are stabbed in the back by their own vendors. The firm who used to provide stuff to market, are selling now selling it directly to their clients. In the worst instances, they do it at a lower price than purchase prices offered to the merchant. How do retailers survive the contest?
We first examine the situation and then list tangible real life survival hints.
Even since e-Commerce rolled in like an unstoppable Juggernaut, retail industry ai not what it was. Before e-Commerce, price composition was fairly straightforward for stores and retailers.
A manufacturer produced a product for price de , a distributor added its mark-up m, and the merchant added the final retail price markup n. A customer confronted P=(p+p*m)*n. If this sounds too mathematical, the simple point is that client didn’t have access to products before every company in supply chain had gotten its markup.
All right, in rural areas, you can visit a farmer and purchase veggies at wholesale prices, but there was not any chance you have a TV set without merchant markup. Things have changed, as big consumer goods manufacturers such as Sony have begun selling their stuff online.
Many producers still respect the company interests of the resellers, maintaining their direct e-Commerce prices high enough, so resellers can adapt their costs and net income. A retail business must pay wages, logistics, warehousing.
With a perfect type of enterprise applications, retailers can decrease inventory build-up and reduce other costs. But e-Commerce can be in trouble when a producer begins selling straight, but brick-and-mortar retailers get hit the most.
There are three retail battle zones:
— Brick-and-mortar against online retailers;
— Retailers against vendors;
— Any retailers, including online ones, from direct advertising manufacturers.
In RetailDoc’s website, there is a fantastic post by retail guru Bob Phibbs that tackle the matter. “Not only is it simpler than ever for customers to purchase products directly from manufacturers on line, but they’re opening their own shops and utilizing third-parties to go around the very retailers who built their own company,” Mr. Phibbs writes. “But I get it, stockholders are searching for extra value and the easy way is to cut out the middleman; like the clients.”
So how do retailers survive? We in ConnectPOS are convinced that the bell doesn’t toll yet. Or even if it does, it is not for you, but for several other retailers that bury their heads in the sand for a long time. Bob Phibbs is optimistic, too. “/…/ the client I think still needs a middleman,” he writes, and poses a question:”As an independent retailer, how can you turn a profit on merchandise such as this if your margins are thin, to start with?”
Key Players of Retail Supply Chain
Distributors and retailers are links in the distribution chain. Their presence is cemented by the value propositions that they need to offer.
Never mind the value propositions of specific goods, here’s what each link from the factory to the customer has to provide:
— Manufacturers’ value is in the products they make.
— Distributors and wholesale companies provide a choice of stuff in bulk, sourced from diverse manufacturers.
— Brick-and-mortar stores offer a choice of great, displayed in a great manner and — this is immensely important — exhibited so that customers can look, touch, smell and try the products before they purchase.
— Online retailers offer more affordable prices and a possibility to store in the comfort of someone’s home.
Brick-and-Mortar vs Online Retail Giants
We still see a wonderful competitive advantage of brick-and-mortar trade. No other player on the retail market makes it possible to take a look at the products in real life.
Bob Phibbs:”From the viewpoint of a classic brick-and-mortar merchant, adding value for the consumer can be a simpler proposition when you are competing with online giants such as eBay and Amazon. The fact that you have the ability to give instant in-store customer support has for years, place you at an advantage.”
We’ve seen an wonderful e-Commerce revolution this millennium. Since Investopedia puts it:”In the last decade, online retail sales have increased by over 20% compared with only 2.9percent for retail sales total.”
While this seems like an apocalypse for physical retail outlets, we really feel that the online expansion is largely associated with Internet usage growth. Amazon and eBay are well established in several product groups, but for clothes, cars, and food a real life experience is preferred. Not to mention that purchasing a sandwich online doesn’t sound really feasible.
Emarketer.com writes about it:”As internet usage continues to grow upon the planet, e-commerce growth will slow over time, settling around 10 percent by the end of the forecast period. But with sales reaching $2.356 trillion in 2018, a 10% growth rate still represents over $200 billion new dollars annually.”
Online retailers can provide products with lower markups if they buy directly from producers. Or have producers selling in their stations. Otherwise, the internet difference with brick-and-mortar is the lack of nice looking screen rooms. On the other hand, online retailers need to dispatch their stuff to buyers, so there’s a good deal of additional logistics involved.
Retailers vs. Manufacturers
“But when you must compete on price directly against vendor online shops, things get harder. 1 merchant told me that a vendor dropped the prices at their online store below what it costs to purchase from the vendor,” Bob Phibbs writes in The Retail Doctor.
How do retailers survive competition if producers begin selling directly? The easy answer is to rely on the essentials. Retailers are experienced in advertising the goods to the end user. For centuries, retailers have shown the goods and made people buy them. Beware, manufacturers are catching up.
Bob Phibbs:”Your first guideline is just to look the part of a successful competitor. It’s important your shop looks every bit as professional and inviting as your vendor’s. In actuality, you should put the effort into looking better than your vendor.”
He says that today’s shoppers want the illusion of classic. “They want the sensation of a funky crab restaurant that’s clean, the food is fantastic and the servers well-trained so that they seek out Joe’s Crab Shack — part of a multinational chain. Same in retail. We would like the sense of old-time clothes but desire it with no BO under the arms along with the suspicious stains on the pants. That means your shop should not look, feel, or smell anything aside from the first rate and contemporary.”
Following is a list of suggestions which Mr. Phibbs gives to retailers (source: The Retail Doctor).
— Look refreshing
Update your floors, clean it. If possible, replace it. Replace your worn-out furnishings with fresh. Replace your monolithic 26″ tall counters with contemporary counters 32″ high. Replace your display fixtures which have had the chrome ripped off from all of the scotch tape with gleaming new ones.
— Look glowing
Update your yellowing fluorescent lighting covers and include even more bulbs or replace with new LED spotlights where appropriate in order for that your camera gear, automobile, tools or kitchen appliances gleam.
— Look blank
Then ensure your professional and appealing displays are well-maintained using a cleaning team, not leaving it up to your sales staff when they have free time.
— Appear confident
Reduce your multiple messages of SAVE NOW! And FREE DELIVERY! And”SALE” on your point of purchase materials. Customers are not stupid and once we notice dozens of Day-Glo signs hanging from the ceiling, papering on your screen windows and taped to each item, it looks as if you are like desperate. Even if you’re, never seem it.
— Look cool
Next get the energy directly from the shop. That means finding ways to receive your vendor’s products to the customers’ hands. Finding methods to demonstrate live — not an LCD display — with your best and brightest people. That might mean borrowing a page from the Apple stores’ original plan of holding courses in the shop. That might mean borrowing a page in the new AT&T shop and have cubbies where salespeople and customers can sit and discuss the products.
— Let your clients look
Back of the 50’s closing Methods and see that your employee’s Key job as
1) Getting clients curious about what they can do with your own products and
2) Getting your goods in your customers’ hands.
It’s OK if a person just spends 30 minutes”looking.” Be thankful for it!
— Keep in touch
Once that customer has bought and used it for a little while, they may be eager for getting smarter about their merchandise. You really can deepen your connection because the client who is probably to search for the low price is the one most interested in data. Find ways to connect to them, provide by email, text or older school telephone call offering a hint for getting more out of their purchase.
— Get the best stuff from manufacturers/vendors
Let your knowledge guide you in choosing merchandise. Know which products from a certain vendor they are interested in, then keep the perfect quantities of those goods in stock. And remember your very best salespeople should be able to poke holes in anyone’s products, so instruct them how to show several replies to your clients’ questions, not just their personal favorite of a single vendor.
We find that this store-front related proposal highly critical for competing vendors and other retailers. As you have probably noticed, it is not just about new carpets. There’s quite a great deal of analysis and multi-faceted real time action required. Besides excellent storefront workers and installation, retailers need excellent back-end tools to make a headway in contest.
Here’s a list of essential tools you can not go without:
— Customer Relations Management (CRM)
You need to understand your customers. A mom-and-pop storekeeper can actually know the customer by heart. In a big store or retail chain, there are tens of thousands of customers. CRM software needs to be available in each and every point of sales. Personalize as much as possible. Get sales history, and goal offers nicely.
— Inventory and Product Information Management (PIM)
The way to prevent the inventory pileup, keep products flowing and run out of inventory, optimize stock between stores? Use cloud-based software that links to CRM and sales history, so that you can forecast sales and restock as needed. PIM enables you to create dynamic price lists and product packages. NB! Pair products from multiple manufacturers, since it is a thing just one vendor operation never does!
— Advanced Point of Sale (POS)
Point of Sale isn’t simply about taking the money and filing the transaction. A contemporary POS features built-in CRM and works in conjunction with stock management. You could set up the lively discount system, so when clients purchase something, the clerk can reward them with reductions within the next department. Again, a manufacturer-turned-retailer is not likely to beat you in this.
— real-life coverage
You’ve got to have a summary of what’s happening. How much does a item actually cost you? How much does storage per item cost? Which points of sale do better and why? Which products are selling better? A contemporary retail software solution — and we are pleased to say ConnectPOS is a top one in that sense — provides you real time reports of any complexity level. You can find a fast 360degree view, or drill down to fine regional, seasonal or product group reports.
Distributors: A New Value Proposition
Finally, let’s not forget about vendors get run over by contest, also. Retailers attempt to get their goods directly from manufacturers. Big box stores are shifting their private labels from generic Milk and Cheese into the land of fancy marketing that imitates high-end brands both by quality and looks. And manufacturers are increasingly more selling directly or through online channels. Some vendors have successfully approached customers and shifted their business to online marketplaces.
For those distributors who haven’t gone online, the afternoon ai not over yet. They’re responsible for their business is centered on specific product groups, especially those which are governed, or rely on an array of resources, or come from abroad seasonally and in enormous quantities. Pharmaceuticals, guns, exotic teas, herbs and legumes, vegetables and grains.
For the remainder of distributors and wholesalers, the only hope would be to perfect their distribution system. The important factor here is to incorporate the warehouse software with customers’ inventory management program.
As a result of cloud-based enterprise management applications, a distributor can plug their supply data to merchant’s software system virtually effortlessly. Leading retailers do not go without automatic inventory replenishment these days, and any API competent inventory software can incorporate the supplier and the retailers.
It is almost like a distributor becomes a provider and common warehouse for several retailers. The vendors, therefore, have a new value proposition to make: they provide over a choice of products, they provide warehouse and logistical support. As a distributor serves many retailers, there is an obvious cost cut demanded.
Retailers Will Survive… But Not All
We feel that in the raging retail competition wars, brick-and-mortar shops may shed ground, but the people who survive will come out stronger. Cash-and-carry and big-box shops will most likely give the way to retailers, who rethink their shops as showrooms, not merely place to keep things until a buyer comes. Analysis and dynamic information systems provide the competitive advantage needed, so the greater the retail program is, the better a merchant is going to do.
►►► ConnectPOS is a cloud-based POS software compatible with multiple platforms including Magento, Shopify & Shopify Plus, and BigCommerce.
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