Rugnews.com Internet Analysis, Part One:
E-COMMERCE BECOMING INCREASINGLY VOLATILE TOPIC FOR RUG INDUSTRY
By Matt Blitz
E-commerce is becoming an increasingly volatile topic for bricks-and-mortar stores, vendors and even Internet retail specialists, as well.
Over the past decade, rug vendors have been seduced by the lure of an added sales channel, and in some cases, this has left retailers seething with resentment.
This is the first in a series of three
articles on how the Internet
is affecting the rug industry.
There is much finger-pointing by brick-and-mortar retailers, who regard producers as unsupportive of stocking dealers.
On the other hand, vendors say they are developing policies that will help create a level playing field for all.
Many retailers feel betrayed .They have built up good will and relationships with manufacturers, but they say their loyalty -- and their purchase of back-up inventory -- has not bought them better protection from the predatory pricing policies of Internet-only retailers.
To counter those accusations, vendors have developed policies regarding minimum Internet advertised prices (MAP). In some cases, they have hired people to police the Internet retailers.
However, the consensus among brick-and-mortar retailers seems to be that the suppliers are coming up short in the battle to protect traditional stores.
Richard Roth, of Roth Carpet, with three locations in and around Pittsburgh told the story of a customer who came in and ordered a hand-tufted 10x14 rug. A few hours later the customer called to cancel, as they had found a better price at a local competitor.
" I gave them a killer price," recalled Roth. "We got aggressive, and we retained the order. But later, they called to cancel because they found the same rug on a website, which beat our aggressive price with one of those ‘call for sale price' offers that work around the vendors' minimum advertised price requirements," said Roth.
Roth tried to explain the store's position to the customer, telling him, " ‘Look you came to our store, you used our selection and our inventory. You relied upon our salesperson to help you and lead you to this product that you didn't even know existed. At least give us the chance to match the Internet price.'"
But by then the customer was uncomfortable and wouldn't budge, according to Roth. "It was very frustrating."
Roth was asked if he does any follow up in situations like this."In these cases, we try to find out who the Internet seller was, so the vendor can cut them off or take some action," he said.
Roth noted that this instance wasn't even solely an Internet problem. It involved a customer who was shopping the price down the street and then on the Internet. Essentially, the Internet, in this case just expanded the definition of"down the street."
Roz Rustigian, owner of Rustigian Rugs in Providence, holds manufacturers largely responsible for the issues between Internet and bricks-and-mortar stores.
"I recently lost a sale to an Internet competitor. The source was a large, well-established, multi-tiered, vertical conglomerate," she said.
Rustigian had quoted $3,700 for a rug which a customer subsequently found online for $2,800 including shipping and with no sales tax levied.
"It was too late to even match by the time I found out. So, yes, the Internet is affecting business," said Rustigian.
Rustigian noted that the Internet is affecting machine-made, branded rugs more than hand-made products, where the source and identification are more difficult for the consumer to determine.
Rustigian also said that large, multi-channel manufacturers are not doing a good job enforcing prices or differentiating goods in an appropriate manner.
"Specialty goods sold to boutique operations should not be available on the Internet and massive catalog operations, especially if the wholesaler is backing up the catalogue or Internet operation with drop-ship service," she said. "Wholesalers should protect their stocking dealers, not work against them."
Rustigian is not betting that things will improve in this economic climate, where the pressure to sell additional units will reign supreme over matters of loyalty or longer-range, rational marketing strategies. "
Donna Lehr of Our Great Rugs in Blue Ridge, GA discussed how the expanding use of the Internet is affecting business."Our area is a seasonal/retirement place, and we get a lot of older folks who come in. They are surprisingly sophisticated about using the Internet to shop," she said.
"People you'd never imagine will come in with comparison prices from their computers," said Lehr. "We've had people who we've spent time with and allowed to take home samples who have come back and told us, ‘You're going to hate me but I saw this online for X amount of dollars less.' "
Lehr said she tries to match the Internet price when she can. "But sometimes the consumer is buying a rug from an online site for less than what we paid for the rug. We can't come close."
Lehr said she tries to talk to them about service and assortment, but often the sales is determined solely on price. "Dollars are dollars and that's how they make their decision."
for the second part of this story,
the vendor point of view,
click here
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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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