I have recently commented on the perception that the Australian Competition and Consumer Commission scrutinises the discounting practices of traditional retailers much more than it does internet businesses resulting in an uneven playing field bricks-and-mortar stores.
My commentary highlighted the advertising practices of some online discounters and how local retailers and suppliers are disadvantaged all in the name of giving consumers “cheaper” prices, which would be fine if the “savings” were true.
And while I covered the issue in-depth, I believe there is another side of the problem; many suppliers and manufacturers only have themselves to blame.
Before I explain my reasoning, it must be recognised these internet daily-deal, group buying, auction and stock clearance websites really only work on branded goods; products that are well known and can easily be price-compared allowing consumers to think they are getting a bargain.
Viewed another way, imagine how successful these sites would be if all they sold was no-name clothes, shoes, handbags and jewellery? How much interest would consumers have in no-name product and how would consumers know they were getting a, so-called, “bargain” if there was no way to compare prices?
More importantly, in would appear that much, if not most, of the product being advertised at enormous “discounts” by these online retailers is being dumped in Australia.
I say that because a closer analysis of most of the watches and jewellery being advertised at up to 80 per cent “discount” has not previously been sold in Australia.
Internet dump houses
These internet dump houses - for that is what some are - have managed to source branded goods that have never been distributed in Australia by the local supplier, or worse, the goods don’t even have local representation.
Think about it, no local company will touch these products to distribute in Australia and yet they are suddenly the hottest brand on the market!
It would appear that many of the these European and US brands have excess stock and need to quit product so they make it available in countries as far away as possible from their home markets.
You can almost hear overseas brand managers say, “Let’s dump all this stuff Down Under where no one will notice. Australia is so far away, who cares?”
You only have to look at some of the watches and jewellery called “designer brands” to see most are unknown. They could be very popular and considered brands in their home markets but in Australia and New Zealand, they are just more of the same, offering nothing new or innovative.
“Same, same but different”, as the Thais say!
So, the internet dump houses gather-up all the dead stock and move it on Down Under knowing that the heavy price “discounting” has no affect in the much larger, and more important home markets.
Out of sight, out of mind, you might say.
Background reading: ACCC picks on jewellery retailers?
However, the matter gets more complex when local suppliers exist and who may have decided not to distribute particular models and designs in Australia. Not only do consumers expect them to repair goods they never actually sold, the local supplier must deal with the complaints and fall-out from local retailers who have to compete with the internet dump sites.
International brands design and manufacture many products and models that are considered not suitable for the local market - whether it be because of colors and fashions or weather, price and timing - local suppliers cannot distribute or stock every product line that a brand releases for its different international territories.
Devalues local retail offering
And that’s where the dump houses are affecting the local market because they manage to get their hands on overseas stock, circumventing the normal distribution channels, so when consumers see a branded product being offered at a fraction of the local price, even though it was never sold in Australia or is very old stock, it devalues the local retail offering as well as the supplier.
It harms the brand and that’s why finger pointing needs to be directed at some of the overseas companies. One must ask them, why do you have so much dead stock in the first place? And how did these internet dump houses get their hands on your stock?
Or, more importantly, why can’t you manage your product, brand and distribution channel so that there is no need for such practices?
There is one clear answer to that; some international companies are driven by sell-in budgets and forecasts - sales to retailers - with little regard to sell-though from the retailer to the consumer.
All products and markets have a natural level and demand and without effective marketing that level cannot be increased. Any attempt to circumvent the market will have the opposite effect of what is desired and the Law of Unintended Consequences will step in.
The sell-through rate is the ultimate measure of success not the sell-in rate.
Brands who “force” product into distribution channels simply to reach sell-in targets and accounting forecasts are helping to create this online discounting channel which is a house of cards.
Surplus stock
All suppliers in every industry have surplus stock. It’s an inevitable part of doing business and many companies have managed the issue for a long time without affecting their brand or distribution channel.
However, increasingly unsold stock will find its way into the non-traditional market and will affect long-term relationships between suppliers and retailers.
Worse, it could get to a stage where it forces independent jewellers away from branded products back to unbranded goods where they have more control over their own destiny thereby reducing the brand’s number of physical “touchpoints” for consumers.
The problem of heavy discounting by online retailers and dump houses is not restricted to Australia, however I wonder whether it’s more significant here because we are seen to be so far away from larger markets.
The JAA is working with the ACCC to ensure a level playing field, and if local suppliers want to remain competitive and protect relationships with independent jewellers, perhaps they could offer to lend a hand too.
One idea would be for a number of local companies gathering together to assist the JAA to monitor these sites and, where appropriate, take action against them.
If there was a fight-back, I have no doubt that any unscrupulous activity by local online retailers would be reduced or stamped out and thereby leveling the playing field, even if only a little!
After all, as the old Redgum song once proclaimed, If you don’t fight you lose!
More reading
ACCC picks on jewellery retailers?
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