In today’s globally competitive environment, selling your products through your own stores, sometimes exclusively, sometimes alongside your traditional sales channels, can have dramatic results; reducing pricing pressures, increasing customer contact and exposure, and increasing profit margins. Companies large and small, from Apple Computer, American Apparel, and Lazy Boy, to Hauser Furniture, Roots, Dream Power, and Kodiak Boot, have all successfully pursued this creative strategy.
How can manufacturer’s relieve some of the constant pricing pressures exerted by their wholesale/retail customer’s who often dangle the threat of offshore sourcing? How can they get a step closer to their customers, allowing them face to face opportunities to explain the benefits of their products, achieve high price points, and obtain valuable market feedback they can use to develop new products and services ? How can they expand their profit margins and eliminate the bites that successive levels of distribution take out of final consumer prices? The answer? Open your own stores. Its not as far fetched as you think.
Question? What do Kodiak Boots, Hauser Furniture, Dream Power, Lululemon Athletica, Roots Leather, Apple Computer, American Apparel, New Balance Footwear and LazyBoy Furniture all have in common? Answer. They all operate their own stores; in some cases exclusively like Hauser, Dream Power and Lululemon, in other cases alongside their conventional retail channels. Kodiak Boots operates almost 30 Work Authority stores across Canada while also selling to Marks Work Warehouse, Factory Shoe, Walmart, and other retail customers. Apple Stores have been such a success that they now account for almost 25% of total company sales. Lululemon, the Vancouver based, publically traded, high end yoga and jogging wear manufacturer sells exclusively through well over 200 company stores around the world. In the case of Hauser, a high end local patio furniture manufacturer, you can only buy their products through their dozen or so retail outlets in Ontario and Quebec. Ditto another small local manufacturer of kid’s make-believe costumes, Dream Power, who only sells its locally made clothes through its retail store in St. Jacobs. A key component of Lazy Boy’s rapid growth was their decision about 15 years ago to convert from conventional furniture store distribution to their own Furniture Galleries. And of course Roots Stores need no explanation. They’ve been part of the company’s strategy since it opened in the early 70′s. Today you can find them in far flung locales including Japan, Taiwan and Asia where rising affluence has seen a surging demand for their products.
In some cases, like Hauser, Lazy Boy and Kodiak, their company stores carry a mix of their own products as well as complimentary items from other manufacturers in order to provide customer’s a complete retail experience. In other cases like Apple, Dream Power, Lululemon, and American Apparel, only their own products are sold. Work Authority stores for example will carry their own Kodiak footwear alongside socks, work clothing, safety vests, protective equipment etc. from several other name brand manufacturers. Lazy Boy and Hauser will stock high end Natuzzi sofas from Italy or lamps and accesories. Whichever route they’ve chosen one thing is for sure. Their stores have been an important part of their success.
Notwithstanding these and many more examples of manufacturers who have vertically integrated into their own stores, most manufacturers shrink at the thought. We know nothing about retail, our existing customer’s would leave in droves, our product line is too narrow, its too costly, we’re not big enough,are only some of the reasons you hear when you bring up the subject. I remember mentioning the idea to a large, privately held Canadian office furniture manufacturer who was deeply committed to local manufacturing but who was constantly under pressure from their customers’s(Office Depot, Staples and the like) to outsource production to Asia. In my mind they were large enough with a wide enough product line to have the resources to at least open some flagship company stores that focussed on office furniture systems. It never happened.
No doubt, establishing your own retail stores is a daunting task; a long term proposition that has a learning curve and requires significant financial and human resources. But it can be done and not all at once. Perhaps you start with a factory outlet or one store, iron out the bugs, learn from the experience, and carry on. Talking to other companies like those above who have done it successfully can allow you to avoid some of the pitfalls. Hiring people with retail knowhow can also help. Partnering with existing retail customers, as in the case of Lazy Boy, sometimes works. The fact of the matter is this. The more a manufacturer can control its own destiny in today’s globally competitive environment the better. And while making your manufacturing lean and cost effective is important, creative marketing strategies are the key to ensure long term success. Building your own stores might be one of them.
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