Jason Solarek picture
May 31, 2019
Jason Solarek at Bridge shared
May 31, 2019
Jason Solarek picture
May 31, 2019
Jason Solarek at Bridge shared

This month’s HFN magazine shares a letter that I wrote to the editor. In the letter, I encourage the industry to team up and push back against Amazon and big online entities in order to ensure our long-term survival. I welcome your feedback on it.

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Fifty-four percent of people looking for a product go directly to Amazon.com, shared a front page story in this week’s Wall St. Journal. This 54 percent is not good for nearly anyone in our industry. Amazon takes a 30 percent cut of the sale and keeps all the customer’s contact information (email, telephone number, address). If you’re a retailer, you can’t operate a successful business giving away 30 percent of your 50 percent cut of a retail sale.

If you’re a brand, over the last few years you were probably relishing in selling direct, cutting out the rep commission, and getting 100 percent of the sale. Well, now Amazon is your new retailer and rep and it’s going to take 30 percent and make you work for it. Amazon puts about nine ads for competing products on your page on Amazon. In this way, you have to constantly keep prices low and manage your page in order to not lose a sale. And you have to buy ads from Amazon. Amazon has you competing in a death match with your competitors. And who wins? The king who watches: Amazon.

I’d highly recommend collaborating with other members of the industry to protect your business and livelihood now before it’s too late.

For those of you out there who still think old retail is alive and doing fine, please keep in mind that Neiman Marcus has $5 billion in debt and may go bankrupt. Traditional retailers have too much debt and showed up to the war with horses. Amazon has tanks and momentum. What happens when the current trend continues and 75 percent of shoppers start on Amazon? It’s time for the Allies to team up.

One hundred percent of our livelihoods depend on what we get that 54 percent to do next.


Comments:
Jason Solarek picture
June 6, 2019 04:02 PM
Jason at Bridge:
Private comment
A sales rep shared this comment with me:
"Your letter rings too true--brands pay anywhere from 5-15 percent to a rep and vendors flip out--yet will pay a bigger percentage to Amazon."

Jason Solarek picture
June 6, 2019 05:38 PM
Jason at Bridge:
Private comment
A sales rep shared this comment with me:

Jason, you make some really good points. However, Amazon is not the only powerful force working against independent retailers. Right now, in my opinion, just as damaging as Amazon is the skyrocketing cost of commercial real estate. Rent in corporately owned shopping centers is out of control along with annual increases in CAM fees. Even in older, less desirable centers they are charging ridiculous rent. I have several customers who tell me that they still have pretty good traffic (despite taking a hit to online ordering) but their rent is killing them.

Just in the last month, I have lost two retailers who closed outright, one that is moving to another location in a less desirable area of town, and three stores in a locally owned chain about to close (three locations closed last year). In one location her space was costing $30,000/month! And they were taking an override on her sales!

It is also worth noting that two national chain stores have closed in the same center with more to come. I have at least one other retailer (that I know of) looking to get out of her lease and move because her CAM fees keep going up dramatically every year. She has two years left on her lease and is looking for someone to assign it to. She wants to buy her own space so she can control her costs. One of the stores that closed was a second location. It took nearly a year to build out and she was in there for less than a year. She signed a 10 year lease! While I would question the wisdom of a 10 year lease, it is easy to see how retailers could get caught up in the promise of a bright and shiny new storefront and the promises of the traffic it could bring.

The real estate owners/managers who demand long term leases are contributing to the problem. It is an all or nothing deal –if you don’t sign, they will find some other sucker to fill that spot. It is like dealing with the mafia.

Jason Solarek picture
June 9, 2019 09:12 PM
Jason at Bridge:
Private comment
Wendy Kvalheim, owner of premium tableware manufacturer Mottahedeh, shared this comment:

Your article is very compelling. Though people are lured by the great potential of selling to Amazon, it is a slippery slope and something that is very difficult to come back from. We made a decision years ago not to join this group. One must make a decision about who one’s audience is. If it is a luxury brand, it must appeal to the exclusive buyer and consumer and the volumes are relatively small. Much of this business is through the internet and requires taking drop ship orders.
Bridge is perfect for this type of business because it saves a lot of man hours by linking the manufacturer with the retailer We value this service and plan to continue.

Best wishes,

Wendy Kvalheim
CEO and Owner
Mottahedeh
5 Corporate Drive
Cranbury, N.J. 08512

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