Retailers have made drastic changes this year in their pre-season orders in hopes of remaining profitable during the economic downtown. Many are trying to wait as late as possible to place their orders, much to the chagrin of vendors, but a more interesting trend is one that seems to run counter to conventional wisdom.
Though the thought goes that in difficult times, retailers fall back to the major brands that they have known for many years, while foregoing smaller, newer brands, The B.O.S.S. Report has heard talk to the contrary from independent, outdoor specialty retailers.
“People are starting to see that theres a risk in letting a particular vendor take up too much of your store,” said a rep for an outdoor retailer in Tennessee. “If retailers invest too heavily in big names and that line doesnt sell as well as expected, theyve essentially shot themselves in the foot. If we want to stay independent, we need to keep specialty [brands] alive.”
On the other end of the spectrum are retailers who feel much more comfortable relying on those big names because of their successful history working together. “While were trying to be universal and fair, [specialty brands] have a much greater chance of taking a hit right now,” said a rep with a Connecticut-based outdoor store. “For us, its all about removing the risk [We go] with whatever has a history with the company. Its based entirely on sell-through history.”
So which approach should retailers take this season to weather the storm?
“I think it just depends,” says Dave Matz, executive director of industry buying group Grassroots Outdoor Alliance . “Retailers should consider their size and history with bigger name-brands before making major inventory decisions. They cant commit to niche products that arent selling, regardless of how much success theyd like to have with the brand Big names are performing extremely well.”
Fortunately, most specialty retailers are not going to be forced to choose between their loyalty to specialty niche brands or the apparent guaranteed financial security of bigger names. Being an independent store allows for a bit more flexibility with inventory that department stores and larger sporting goods stores dont have. When larger retailers had to cut deeply into pre-season commitments in the fourth quarter, it was the specialty retailer that saw the benefit in the form of discounted inventories.
“Im hearing big retailers [are suffering] 20% to 50% declines [in sales] and those guys are not so good at finding small niche players,” commented Matz. “That could be another reason for us to move away from a large major but it also pushes specialty into more of the fringe. If theres five core products a big box is going to carry from a vendor, then a specialty store is also going to carry those products but theyre also going to have five other products on either side and thats how were going to survive.”
The door definitely isnt closed on smaller brands trying to stay afloat in retail. Alternatives to big-name brands that are innovative and offer comparable price points are likely to be embraced in this environment. “If you have a particularly good brand thats new and fresh and offers something unique in the marketplace We want to have that because thats what we want, were specialty,” said Matz. But if theres nothing particular innovative about the niche-brand product, retailers are likely to choose the bigger name. “If its [generic], were going to go with best margin for best quality.”
However retailers choose to juggle their orders this season, vendors should expect to see unusually orders coming in. “Theres not as much business and vendors are going to have to get used to [that],” said Matz. “Were going to be cutting our orders; things that dont turn gotta go. Without demand from the customer, we cant afford to buy more stuff.”
The Connecticut rep agreed. “Vendors are only just beginning to deal with this [change in inventory orders] Retailers have known since October when nobody walked in their stores.”
Matz continued to say that some retailers may be dropping whole product lines from their floor in favor of ordering them on-demand. He cited luggage as a good example of a product that turns too slowly. “We cant afford to buy stuff that were going to be sitting on,” he said. Some retailers are opting to display one or two items of a vendors luggage line and then ordering the specific product a costumer wants upon request.
“It really has to be whats best for your company,” concluded the Connecticut rep. “You just need to make sure youre keeping your profitability and cash flow up. [Retailers] cant afford having stuff on their shelves they cant sell.”
On the vendor side, the bigger brands are being a bit more particular as well. While the retailers that are in a buying group are thought to be a bit safer due to group rules and frequent monitoring, vendors are now assessing retailers as a bank would assess a loan candidate. That alone may push more smaller retailers to pursue more smaller specialty niche brands as well.
