Rugnews.com Internet Analysis, Part Two:
RUG VENDORS DEVELOPING POLICIES
TO KEEP BOTH TRADITIONAL STORES
AND INTERNET RETAILERS SATISFIED

By Matt Blitz

While bricks-and-mortar stores are frustrated by the competition from Internet retailers, rug producers say they are developing policies to help keep the various retail channels satisfied.

This is the second in a series of
 three articles on how the Internet
is affecting the rug industry.

Over the years many vendors have instituted Minimum Advertised Price (MAP) policies. Those policies are constantly being revised.

Nourison recently issued a new policy regarding Internet Minimum Advertised Prices which explicitly prohibits"Call for Price" displays on Nourison rugs, according to Pat Muschamp, national sales vice president.

The ‘Call for Price' ads have caused a lot of the problem with Internet retailers trying to under-cut each other and circumvent  MAP policies,  Muschamp said.

(When an Internet site asks customers to "call for the price" on a specific item, the price is technically not "advertised.")

"We are hoping our new policy will eliminate a lot of the issues," said Muschamp. "We still don't tell anybody what they can sell our products for, but we try and make it a fair and even opportunity for everyone."

Muschamp explained that Nourison has developed its latest Internet policy by studying what other industries have done in similar situations.

"In the end, the policies are only as good as the people who enforce them." Muschamp said."Actually the changes will help both the brick-and-mortar structures as well as Internet retailers."

Austin Craley, vice president of sales for Momeni, noted that the company sells to some direct drop-ship Internet retailers, but  the vast majority of its customers that sell on the Internet also have retail locations.

Discussing how Momeni protects brick-and-mortar retailers, Craley said the company is rigorous about enforcing its  MAP policy.

"We have people whose job it is to check on enforcing the policy. Because we are so effective at enforcement, we get calls from Internet sites when they see violations, because they know we are going to support them," said Craley. "If they are going to play by the rules, then they want make sure everybody else should, too. They know we will make sure of that."

When violators are caught, Momeni expects the account to fix the violation within 24 hours or they are put on sales hold. "If it's not taken care of quickly enough, or we have someone who's a repeat violator, we will shut them down," said Craley.

"It happened a lot more in the early days of the Internet, when it was more of a ‘wild west' atmosphere," said Craley. "Now these cases are much more isolated. The guys who are doing Internet business now are more serious, and are interested in being a legitimate distribution channel. They have the same pressures and margins as everybody else. And they are very sensitive to people who might try to gain an advantage. We are interested in helping them maintain that level playing field." 

Internet-only retailers currently account for less than 5% of Momeni's business, but that figure is growing, according to Craley.

 Craley said that local retailers have an advantage over Internet sites.

 "I feel the majority of consumers would prefer to buy from a local retailer. They can see it and feel it and put their fabrics against the rug, and if they have any problems they have a person they can talk to. They know the store isn't going anywhere, and you can't do that with Internet sites," according to Craley.

Rohit Singh, vice president of e-commerce at Surya, said that the company doesn't directly police for MAP violators, because the situation has become self-regulating.

"We ask all our e-commerce customers to sign our Internet Policy Agreement stating they will honor our MAP policy.  Violations are brought to us by Internet or brick-and-mortar customers. We then address it with the customer and get the account rep involved to assure the situation is rectified."

Singh stated that repeated violations, though extremely rare, lead to ceasing business with the customer.

The Internet is a growing part of Surya's business, according to Singh.

"E-commerce is the way to go," he said. While we see people that like to go to the store to see and feel the product, more and more people are buying on the Internet. There has been a steady increase and I can foresee, just by looking at the numbers, that at some point there will be more business done through e-commerce than in the stores."

Singh said traditional bricks-and-mortar retailers don't voice many complaints about Internet competition, because of the company's MAP policies.

 "Brick-and-mortar business is very important to us, and we build in enough to give our store customers a chance to compete. There will always be consumers who want to come into the store and shop, and brick-and-mortar stores have certain advantages that go beyond the lowest price," said Singh. "We will continue to sell to both because ultimately it's going to be the consumers who decide what's important to them."

For the first article in this three-part  series,
the bricks-and-mortar store point of view,
click here

03.06.09