The Roots Of The Natural Products Industry Are Being Shaken
The supplement industry began as a symbiotic partnership between manufacturers and independent retailers. Independent retailers are historically known as centers for innovation and education, developing loyal communities of consumers who benefit from the education and services that these stores offer.
This is part of why SENPA exists. To bring independent retailers and manufacturers together because this relationship needs to be nourished.
However, in recent years, the supplement industry has undergone drastic changes. It began with Amazon and other e-commerce websites, but this change has continued to develop as many new brands are launching first direct to consumer, and sometimes choosing not to enter into bricks and mortar retail at all. These changes have greatly affected independent retailers.
Change has happened before. Prior to the internet, mail order was a major concern. However, this time the roots of our industry have been shaken in major ways.
What changed? Why are these independent retailers now struggling in new and sometimes unclear ways? Why has something like e-commerce made such a dent in independent sales?
The New Wild West
The internet has created more efficiency in our daily lives than generations prior could have ever thought possible. Some have forgotten a time before the internet, but it is still very new and is being shaped daily. Right now, it is the wild west when it comes to setting regulations with commerce.
When the e-commerce age began, many supplement companies excitingly partnered with internet companies that could make their items easily accessible to the masses. These e-tailers’ primary selling points are price and convenience, so naturally, they competed against one another on these points, and thus the race for the bottom in pricing began.
Manufacturers had to navigate these new, uncharted waters and figure out how to work with companies like Amazon in a way that made sense for their brands. It was a massive undertaking and many companies are still ironing out the kinks in the process.
The Masters of Convenience
Not only has the rise of e-commerce giants made an impact on how business shifted for manufacturers, it has made a tremendous impact on consumers. Let’s face the fact that Amazon and some other e-tailers have mastered the art of convenience. In today’s time, convenience has become a bigger priority for consumers than ever before.
Many brick and mortar retailers have stepped up their game and offered more convenience factors and improved the overall customer experience. Still, though, we see customers opting for e-commerce over brick and mortar.
Compared to other industries, the supplement industry has fared better than others because it is not only retail-based but also a service that people are desperately looking for. This fact helps retailers defend against the convenience of online shopping stealing away customers, a luxury that some other industries do not have. Retailers have an opportunity in their marketing efforts to highlight the added value that they offer to the community, showcasing the education of their staff, and unique aspects of their customer experience.
It is evident that e-commerce is still on the rise, despite retailers’ efforts to improve the customer experience and convenience, hinting that the elephant in the room is the deep discounts and incomparable pricing available online.
The Elephant In The Room
There is a long time business quote, “You don’t have to be the cheapest in town, but you have to be close.”
Retailers see this principle come into play at all of their stores. Many times they are left scratching their heads as they have customers price match on their cell phones and sincerely ask why retailers are charging so much more than these other websites. Customers are always going to look for the lowest price and the best value.
The problem is that many manufacturers are not enforcing MAP Policy online, so the competition between online and brick and mortar stores is even greater than ever. Some manufacturers claim that enforcing such policies are impossible, or “too difficult.” And Amazon isn’t the only issue. Major players like Walmart, Ebay, and now Kroger are jumping into the works making MAP enforcement even more of a challenge. There is no question that such an effort requires a major commitment. Many sellers on Amazon and other sites do so anonymously, and it is growing more common for some independent retailers to also sell on Amazon as a secondary source of revenue.
However, some brands are taking a stand and playing the often endless “wack-a-mole” game of enforcing their pricing.
This is tremendously important, because the pricing differential is a reality. When analyzing some online prices, we often discover that many times products are selling at wholesale prices. Now, it’s hard to ask any customer, even a long-time, loyal customer, to forego these rock-bottom prices.
Where Do We Go From Here?
This industry has always been based on the symbiotic relationship between independent retailers and manufacturers. They need to work together in order to ensure that consumers get access to the best products at the best prices.
If you are a retailer, you have more power than you may think. If you are struggling with losing customers to prices online that you can’t compete with, have those tough conversations with your supplement brands and demand fair pricing. If they won’t budge, then there are plenty of other brands that are willing to work with independent retailers and offer fair pricing online. Work with your sales reps, but also, push the message higher up in the food chain. Through the power of LinkedIn and other social media sites, you can often send messages to the vice presidents and chief executives of most brands.
Keep in mind that this does go both ways. Though retailers should not have to sell at prices that cause them to drastically cut margins, retailers also need to be flexible in their pricing to compete and be willing to offer deeper discounts to customers. That’s why partnering with brands that enforce MAP policy is key to allow this to take place.
Retailers, you have education as your #1 strength above your online competition, but keep in mind that your education is not the only thing that customers are looking for. Technology has become integral to society and retailers have to start catching up. There are many new brands that are offering both technology and education without having a brick and mortar location and they are picking up steam very quickly. Retailers need to start adapting to stay relevant.
Differentiate yourself from your online competitors by offering not only the best education, but by creating memorable shopping experiences for your customers. Don’t just be a place where people shop but be a place where your community gathers because you create offerings that customers want to experience on a regular basis.
If you are a manufacturer, invest in the relationships with your independent retailers and you will see your sales increase. The retailers want your support and your education. They want to see you visit their stores and know you are there for them. They pass this loyalty to your brands along to their customers.
Let’s get back to the roots of this industry: Where retailers and manufacturers join forces to provide the amazing products we have to our customers. Together, we can take this industry to new heights.