Rugnews.com Internet Analysis, Part Three:
INTERNET SPECIALIST OFFERS CANDID
COMMENTS ON HIS SIDE OF THE FENCE
By Matthew Blitz
The Internet rug business is still a touchy subject, but there are several sides to this sometimes thorny issue. In this article, Rugnews.com interviews Koorosh Yaraghi, president of RugsUSA.com who offers candid comments from the Internet retailer's point of view.
This is the third in a series of
www.rugnews.com articles
on Internet rug sales.
For the
retail point of view, click here
For the
vendor point of view, click here
In the first two articles in this series, Rugnews.com discussed how many bricks-and-mortar retailers harbor some resentment toward vendors who sell to Internet sites and drop-ship online purchases directly to consumers. To help allay the most pressing concerns about pricing, most suppliers have established Minimum Advertised Prices (MAP) to help assure a level playing field for both Internet retailers and bricks-and-mortar dealers.
Koorosh Yaraghi is the president and founder of RugsUSA.com, which has been in business since 1998.
The company does stock a portion of what it sells online, mainly closeout items bought from suppliers, or popular items that turn quickly.
The company's major vendors are Momeni, Capel, Shaw, and Sphinx."There are only a small percentage of vendors who don't have MAPs today," said Yaraghi. " We have signed agreements to stay within these MAPs and we do."
When asked about other online vendors who break MAP policy, Yaraghi replied,"We don't check our competition, but our customers do. A consumer may call us to tell us a price they saw somewhere, and we'll know if it's below MAP. Then we alert the vendor."
What happens then?"I think some of the vendors are more diligent than others regarding this issue," said Yaraghi. "We've seen some of the larger ones that are, surprisingly, not as good at enforcing as some of the smaller ones."
Capel is one of the vendors doing a good job with its MAP pricing, Yaraghi noted. "We rarely see a Capel rug shown below MAP," he said.
Regarding resentment of brick-and-mortar retailers, Yaraghi said it is no longer a serious bone of contention. He said it's been years since he's gotten any negative comments at a market regarding his Internet sales."I think the resentment is more towards the vendors," he said.
At the beginning of the Internet revolution, bricks-and-mortar stores argued that they carried inventory and had high operating costs, while Internet retailers just threw a bunch of pictures up on a website.
Most successful e-tail sites require a major financial investment, Yaraghi pointed out. "The cost of e-commerce can be quite high. In fact, a website can require more investment than some 2,000 or even 8,000 sq. ft. stores."
What are some of the costs necessary for e-commerce?"Primarily we have to hire high-quality people to advertise and maintain the site," explained Yaraghi. " I.T. people cost a lot more than, say, a stock person whose job is to flip rugs in a store. Another high cost we have is our free shipping, and of course, returns."
Returns are one of the necessary evils of e-commerce, Yaraghi pointed out. "Our return rate is 8 to 9%, which is probably comparable to a catalog retailer, but much higher than a regular store."
The reasons for the high return rates are directly linked to touch-and-feel and color perception, which are drawbacks of buying any fashion product on the Internet.
"An Internet retailer will always have a higher return rate than a store where consumers can touch and feel and see the rug in person before they buy," he said.
Color is an especially difficult issue, noted Yaraghi. "For us, color is one of the main reasons for returns.The rug isn't what the person saw on their computer monitor. And this is extremely difficult to control. People's monitors are all over the place when it comes to how they show different colors," he pointed out.
Sometimes vendor photography contributes to the problem, as well. "There are also vendors whose photography isn't always color-correct or the highest resolution," he said.
Yaraghi singled out some vendors who do a particularly good job with photography. "The vendors we use who I'd say are the best at providing good photography are Surya and Capel. Capel is especially good as they make it easy for us to download photos off their website in high resolution, so our customers can zoom in and see good detail of the rug. This can help in cutting down the number of returns."
Yaraghi suggested that bricks-and-mortar retailers, especially smaller ones, would be better able to compete with Internet sites if they were better at differentiating the products they stock.
"Internet commerce is database-driven. Any customer can search the Internet for a model number that everyone carries and find out who has the best price. What traditional retailers need to do is find the dozens of other importers who can supply them with rugs that won't compete on price alone."
In other words, independent bricks and mortar retailers should stay away from generic rugs that can be found just about anywhere.
"The retail store is the perfect place to be selling that unique item that has the romance behind it -- that special something that needs to be experienced," he said.."The Internet can never do this. Can the Internet be shopped for price? Yes. Can it be shopped for convenience? Yes. But it will never allow the consumer the experience of going into a store and having an in-person buying experience."
05.15.09
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Matt Blitz served as creative director at Nourison for 12 years, and is now president
of his own company, mBlitz Marketing & Design. The company specializes in services
for home furnishings industry manufacturers and retailers.
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Matt Blitz
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