Nonfoods Talk: Where the future lies

In good economic times or bad, in the end, quality will usually trump price.

Seth_MendelsonA manufacturer of housewares products pulled me aside at the annual International Housewares Show in blustery Chicago last month to give me his prediction on the future of mass retailing.

Adamantly, he said that brick and mortar stores do not stand a chance against the likes of Amazon.com and other digital stores that are popping up all over the Internet. Interestingly, he added, it had little to do with what the digital sites were doing, and everything to do with how the traditional retailers were handling their buying, marketing and manufacturing.

His story is a good one and we should all pay attention, for it might actually portend the end of one retail era and the beginning of another one.

He says that one of the major retailers approached him within the last year and asked for a better price on his products. Asked may be nice. The way he put it the retailer demanded a better price or his item(s) were getting kicked out of the merchandise mix.

So he did what all manufacturers do at this point. Petrified that a sizeable amount of business was on the line, he rolled up his sleeves and went back into the laboratory to come up with a way to offer the retailer a better price without driving himself out of business. Weeks later, he offered the merchant the best price he could do without sacrificing the quality his products are known for or putting himself under.

Not good enough, the retailer said, and out his products went from the mix. In their place, he said, was merchandise that simply did not measure up in quality. “For the retailer, from my view, it is a short-term gain and a long-term loss,” he said. “Consumers will be overjoyed with the better price at first, but eventually when the thing disintegrates because it is made out of cardboard, not wood, they will remember where they got it from and not go back there again.”

Great point. How often over the last 30 years have we heard from talking heads in our industry how important it was to compete on price to maintain market share and sales? But, what we have found that in good times and bad times is that offering the best price—and sacrificing other things—may have its limits.

Today, value is the key to a retailer’s success. The retail industry has become so consumed by offering the best price that it has forgotten that quality and value play just as important a role in the consumer’s decision on what product to purchase and where to purchase it.

The good news for the supermarket industry is that some retailers have already jumped on this bandwagon. Such chains as Whole Foods, Wegmans, HEB, Safeway, Kroger and others have done an admirable job offering the consumer quality on the food side of the business. Our 2013 Independent Retailer of the Year, Roundy’s, showed us in our February cover story how important it is to offer shoppers a distinctive, friendly and high-quality shopping experience.

Frankly, these retailers may have no other choice since messing with someone’s dinner could result in instant disqualification as an option for grocery shopping with these shoppers. And, the consumer does not forget so quickly.

That manufacturer? He says he now offers all his products on the Internet at various sites including Amazon and business has never been better. “Consumers can pick from a variety of colors, designs and price points,” he says. “Now I maintain the quality I have been known for and offer people what they want. The best part is that I don’t have to put up with unreasonable demands from some retailer who is only interested in the best price, not the best quality.”

Hmmm… who is the joke on? 

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