A Hard Bargain

Photo Courtesy of Lukas Vermeer

Photo Courtesy of Lukas Vermeer

Independent, bricks-and-mortar retailers don’t have the economies of scale that e-commerce companies do. Haggle them down to the last dollar and they won’t survive for long.

For the past several weeks my inbox has been full of e-blasts with offers of “Deals! Deals! Deals!” Last week, Holt Renfrew invited me to shop from 6pm to midnight to scarf up designer frippery at 50% off. A few days before that, the Hudson’s Bay Company tried to lure me to ‘The Room,’ their upscale fashion salon, with 70% off. J. Crew is desperate to sell me “last-minute” gift items like cashmere socks and flannel onesies for 30% off (Only 30%? Kidding me, right?)

The point is, the easy money has already been made in retailing—circa 1985. Today, shops have to fight tooth-and-nail for every discretionary dollar. And, with the rise of e-commerce, the merchant’s lot has never been harder, as smartphones and price comparison sites allow us to scour—in mere seconds—the globe for the lowest cost vendor. As usual, it’s the little guy who is taking a hit.

I’m not crying for the billionaire Westons (who own Holt Renfrew) or Richard Baker, who bought Hudson’s Bay Company. I suspect they’ll be all right. Their coffers are wide and deep enough to absorb a few markdowns and eat some margin. But, I do fear for the intrepid local retailers, whose slim profit margins, high rents and service costs are at the mercy of Sword of Damocles. (A.K.A.: today’s consumers armed with smartphones.)

What used to be limited to the souks of Marrakesh or the markets of Beijing is now increasingly mainstream. Haggling over price is becoming the norm at both low-and high-end retailers. Consumers know that most store managers, with sales quotas to hit, would rather chip the price down a bit or toss in an extra goody than see you walk out the door. Rarely will they offer a discount outright but they are becoming increasingly open to negotiating price.

To handle this new, more aggressive kind of consumer, several retailers are coaching their staff on how to spot the person who is angling to strike a deal—before she walks away. Likely she has visited an actual store to scope out the merchandise before buying it online at a discount. Essentially, the bricks-and-mortar shops are in danger of becoming fancy showrooms that simply display merchandise (a phenomenon known as “showrooming”) instead of selling it. And, except for the biggest vendors who can designate a flagship store as a loss-leader, that’s not a viable long-term option.

In many ways, this behaviour is precisely what the big players are counting on. They can’t offer you personal service, but they can give you a killer price.

According to a recent survey by Visa Canada, 75 percent of Canadians plan to shop online this holiday season. Smartphone ownership has increased 61 percent over the past two years—and, smartphone owners like to shop are planning to spend 27 percent more than non-smartphone shoppers this year.

So, where does this trend leave the small, independent retailer? Unless we want a city populated with big box American-owned off-price stores (Winners, Homesense, Marshall’s, Walmart, Target), or big American-owned department stores, (Hudson’s Bay Company, Nordstroms, Saks), we should stop and think.

Everyone loves a bargain. But, instead of chiseling a local merchant down into the ground over the last dollar and forcing him to price match a retailing behemoth that benefits from efficiencies of scale, it would be better to recognize the value of having local shopkeepers. And pay accordingly. Is the high-level and personal service typically associated with independent shopkeepers, as well as the possibility of building a long-term relationship worth a small premium? I think so.

Interestingly, at the same time that e-commerce is experiencing a growth spurt, bricks-and-mortar shops seemed poised for a renaissance. Shopify is a hot Canadian technology company that creates e-commerce software. A venture capital darling, Shopify has just received a $100 million cash infusion. Its forward-thinking CEO plans to develop programs for actual stores.

So, this holiday season, I’m hitting the shops, not the keyboard. How about you?

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