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July 18, 2008
Winning When Your Vendors Become Competitors
Vendors have been on a retail push in recent years, opening standalone stores and selling direct to consumers online. This has left specialty retailers in a difficult position as they try to manage competition from their own vendors.
So, what do you do when your key vendors start moving in on your turf? If you start seeing declining sales, you need to be prepared to drop them. This means lining up complementary lines to replace those vendors.
This can be a tough decision but sometimes it's necessary. Many specialty stores faced a similar situation a few years ago when Nordstrom and Saks started undergoing aggressive expansion with the Canali line. Suddenly, stores that carried the Canali brand faced competition from big box retailers who could afford to take steep markdowns. Several specialty retailers had to drop the line and replace it with a complementary Italian suit maker.
The same strategy applies to direct vendor competition. When you see your market eroding, it's time to move on. Now, this isn't always the case with vendor expansion. Sometimes vendors open multiple stores and their retailers still do well because of added brand recognition and marketing. This is a good situation to be in because your vendor is paying for the marketing.
A more complicated situation arises when your vendor starts selling online. Then it doesn't matter if they don't have a store in your town because they are available everywhere, at every computer. They have the opportunity to get to know your customers online and even email them directly with promotional information.
There's only one true solution when it comes to vendor competition - promote your own store and your own brand. You might have the same product as the vendors but you offer service and knowledge that sets you apart. You offer a certain atmosphere and a distinct shopping experience that your vendors can never compete with. Sure, you offer certain brands, but these brands can change and your brand - your store - has the power to navigate these changes and present the right product for your customers.
Posted by Steve Pruitt at July 18, 2008 07:24 PM
