Challenges, problems, and triumphs
-- from a manufacturer's perspective.
Retail, E-tail, and "Unfair"
Expensive advertising, false promises, and
by Catherine Bracken (April, 2004)
Note: "Vinny" has graciously agreed to give up
his column this month for the following article. A recent CLN
issue reported on a group of scrapbook storeowners encouraging
vendors to avoid selling to home retailers and e-tail sites,
claiming home and cyber stores have an unfair advantage over
brick-and-mortar operations. That inspired e-tailer Catherine
Bracken of the Cottage Discount Needlework to write the following:
About five years ago, we moved our needlework store online
because we lost money every year trying to make it as an independent
needlework shop. Needlework inventory is notoriously hard to
liquidate, so we tried closing it out online. Ultimately, selling
online allowed us to continue in business. We closed the store when
the lease expired, but continued to build our Internet business. I
changed my business model because the shop just wasnít working for
us in our location, despite our best efforts.
I did not go to all my vendors and tell them if they would just
stop selling to Wal-Mart or Michaelís, I might make it. Thatís
not the American entrepreneurial model.
Our Internet customers are rarely in a city with a strong
needlework shop. I can count on one hand the number of orders we get
in a month from a city I even recognize by name. Instead, our
customers live in the country or are home-bound and couldnít drive
to a shop if they wanted to. Nonetheless, we find shops are still
threatened by us, even after five years. When I attend a regional
market, I hear people talking about our business in hushed tones
just out of earshot. Iím careful to use our store name instead of
the URL on our name badges to avoid getting accosted in elevators
(although it still happens).
Over the years, several vendors made up some really stupid
reasons not to sell to us, under pressure from shops. One said they
didnít like people who discount (but the vendor had product in a
Hobby Lobby at a discounted price). I had a sales rep tell me that
several stores had complained about finding the same products on our
site that he sold to them. He cooled them off, partly by explaining
there was no way one Internet business would make a dent in any one
I contacted a lawyer specializing in restraint-of-trade issues,
who told me that unless I could specifically prove that the vendor
refused to sell to us due to shop pressure, the FTC would conclude
that the vendor made a reasonable decision as to the channels it
wished to sell in. Of course, short of someone taping a meeting of
vendors at a trade show, or such a group getting really stupid and
writing a joint letter on the subject, that kind of proof is just
about impossible to get.
I gave up, and found substitute products where I could. But it
still irritated me that I was being restrained from selling goods to
willing customers. It appears many of the yarn vendors are now going
this direction as well. I was told by a rep at the Dallas needlework
market last month that someone came through market with an Internet
concept for yarn but nobody would sell to him because the
manufacturers wanted to "support the stores." A noble
goal, on its own, and one I selfishly wish had benefitted my store
more when we were open.
Brick-and-mortar e-tail sites.
Recently, I asked a manufacturer exactly how the home-bound and
rural customers were supposed to purchase goods if the Internet was
off-limits. This particular vendor said as long as a
brick-and-mortar store was in the picture, that store could sell
through the Internet as well. This vendor claimed to be opposed to
strictly Internet businesses. I find this to be a very short sighted
position, as selling online and selling in store involve two very
different skill sets, even when you remove pricing from the picture.
The customer shopping at the website of a neighborhood shop does not
have the same experience as the customer IN the shop, or the
customer at a sophisticated website. Instead, the customer gets the
worst of both worlds. Let me use my business as an example.
Our shop uses a very expensive software packages to handle
Internet sales, along with a high-priced Pro Package for web hosting
and secure ordering. It can handle limitless numbers of users at the
same time and a huge database of products, including products that
come in more than 400 colors each. The average store uses a simple
Access-driven database (if any) that caps out at about 20 concurrent
users. Many of them donít have secure online processing, although
Some stores donít know how to optimize images to speed loading
time to improve the customerís online experience, while we use
(again) expensive software for image management. I use GoogleAdwords
(at several hundred dollars/month) to introduce targeted customers
to our site so they donít have to plow through tons of irrelevant
We write interesting and informative articles about some of the
products we sell (and competing products) to make up for the loss of
personal contact in the store. (Visit our site at www.discountneedlework.com
and look for the lamps comparison article signup on the home page,
the needles article on the tips page, or the 10 pages about using a
needlework frame found on the supplies/frames page). Each of these
articles takes about 40 hours to research, test, illustrate, and set
up for distribution.
To provide additional personal involvement, we have audio
segments on selected portions of the site explaining how to use our
thread color-converter or the benefits of the Daylight UltraSlim
lamp. Recently, I took digital video of Kay (of Kís Creations)
demonstrating her perfect-tension side bars which I will use as
streaming video to further educate customers. We use automated email
handling to distribute an informative email newsletter, as well as
to offer coupons and tips to subscribers.
Some stores think Iím just skimming cream off the top by
selling online, leaving them with the costly side of the business.
These people should look at my advertising and technical expenses to
see that I am not without expense Ė they are just different
Consider these Internet-related costs that the average shop doesnít
have: online advertising, hosting fees, payment gateway fees, a
higher discount rate on charge cards, higher labor costs for packing
and shipping, higher inventory costs (you typically need more
inventory to sell online), programming fees, 800 calls, extra phone
line costs, warehouse rental, packing supplies, and more.
My software costs include online point of sale and shopping cart,
image management, database editor, automated email processing, an
html editor such as Front Page, search engine optimization software,
and for every software package, annual updates.
My capital expenditures include both digital still and video
cameras, a flat-bed scanner, two fax machines, and two late-model
computers to name a few, none of which I needed to sell needlework
in my store.
The ability to sell in this channel is not something the average
shop owner can easily handle well. A good local shop should be
focusing on building local business through trunk shows, classes,
stitch-ins, and local advertising, rather than trying to learn the
arcane issues of optimization and streaming video. If storeowners
are doing their jobs well, maintaining a quality website would take
more time than is really available.
If I were a vendor, I would be somewhat concerned about the poor
showing my product was getting in some of the slap-dash websites
that shops put up, instead of worrying about "Internet
Of course, thatís just me. The vendors who have wholeheartedly
supported us in our online effort have been rewarded with
outstanding sales levels from us due to the emphasis we put on
selling their products.
When you strip away all the "made up" reasons for not
selling to a quality Internet business, all thatís left is this:
"The shops donít like it and asked that we not sell to you,
so we wonít."
Kudos, therefore, to the brave manufacturers and distributors who
are trying out this new retail channel over the Internet by
supporting a program that will teach people how to do it right. And
shame on those short-sighted stores who think that competition is a
Note: Have any comments on Catherine's thoughts? Email them
Ė on or off the record Ė to email@example.com.
Visit Catherine's site at www.discountneedlework.com.
To read previous "Vinny Da Vendor" articles, click on the
titles in the right-hand column.