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Canada: Retailers see red over brands setting up their own stores

Canada: Retailers see red over brands setting up their own stores

Junio 20, 2017

Autor/Fuente: By FRANCINE KOPUN - The Star 👤Periodista: María Alejandra Lopez 🕔20.Jun 2017

 

Cookware retailer Fred Pritchard doesn’t mince words when it comes to how he feels about brands selling directly to consumers.

“They’re doing it because they’re greedy and they want the retail price,” Pritchard says.

Pritchard says that when brands set up their own stores, retailers who have been selling those same brands for years, educating consumers and growing the market, end up being bypassed by the brands they helped build.

And yet the trend of brands selling directly to consumers is poised to grow, according to Don Unser, retail business president at the NPD Group, speaking at a recent retail conference in Toronto.

Publicly traded brands are under pressure from shareholders to grow profits, and selling directly to consumers is a way for them to do that at a time when retail sales are trending downward and stores where they used to be sold, including department stores, are shrinking in number.

“They’ve got to find growth,” Unser says.

Zwilling J.A. Henckels is by no means the only brand to begin selling directly to consumers. In addition to selling Le Creuset items through more than a dozen other retailers in the GTA, Le Creuset now also operates two stores of its own.

Branded stores are established among luxury brands, including Chanel, Burberry, Coach and Michael Kors, although there are signs of overexpansion — Michael Kors recently announced it is closing 125 of its full-price retail stores, out of 960 stores worldwide.

Pritchard, vice-president of Golda’s Kitchen Inc. in Mississauga, says his store’s relationship with Zwilling J.A. Henckels, makers of premium knives, has been severed over the issue.

In January, Golda’s Kitchen received a letter from Zwilling J.A. Henckels Canada Ltd. president Mrinal Sharma telling the store to stop selling Zwilling products on any third-party websites, including Amazon.ca, where Zwilling sells its own products directly to consumers.

“Effective immediately, no new orders placed by Golda’s Kitchen Inc will be processed until all Zwilling products are removed,” the letter reads.

“Once you have ceased all sales of Zwilling product on all third-party online market places, please notify . . . our National Sales Manager . . . so that we can reassess your account status.”

Zwilling also has its own shopping website for direct sales to consumers and has opened three bricks-and-mortar stores in Canada since 2014, including one in Vaughan Mills.

Branded stores allow the company to offer consumers a wider breadth of selection, said Kristen Wang, public relations co-ordinator at Zwilling J.A. Henckels Canada Ltd. More bricks-and-mortar Zwilling stores in Canada are planned.

Zwilling did not respond to a request for comment on the letter or allegations that manufacturers setting up branded stores are acting out of greed.

Pritchard said he’s turned to competing brands for his customers.

Diane Petryna, owner of Take 2 Boutique, an outdoor lifestyle store in Thunder Bay, Ont., says branded stores in her market sector have become such a problem that she actively seeks out brands that do not sell directly to the public and have no plans to sell directly to the public.

“Our independent stores become showrooms and we get zero compensation. They’re also cutting out the salesman,” Petryna says.

“We’re looking at brands that don’t play games this way. We want brands that understand that we are the sales force and we deserve some compensation.”

The upside, Petryna says, is that in doing so, she has been able to discover new brands for her customers.

Single-brand stores typically don’t sell their products at lower prices to consumers, but they retain more profit because they’re cutting out retail intermediaries. Because of the size of the stores, they are often able to offer a wider variety of products to consumers.

Deepak Chopra, country manager at Breitling, a luxury Swiss watchmaker opening a branded store at Yorkdale this summer, says branded stores strengthen the brand and make it easier to build personal relationships with consumers by offering novel experiences. A Breitling store in Zurich, Switzerland, for example, has a bar.

“When a brand opens a store, it’s a billboard,” says Chopra, speaking at a recent retail conference in Toronto.

Having brand stores in neighbourhoods serves another purpose, according to Michelle Smye, general manager at Hallmark Cards Canada. It helps the brand better understand the community where its products are sold.

Existing retailers remain an important part of the marketplace.

“We need them to succeed. It’s not our intent to cannibalize their business,” says Smye, also speaking at the conference, Store 2017, put on by the Retail Council of Canada.

Arthur Fleischmann, president and CEO of the advertising agency John St., says branded stores don’t undermine larger luxury retailers.

“The boutique serves to make that brand even more desirable in all channels,” Fleischmann says.

“Ralph Lauren stores feel like a British manor house and suggest a Brahmin lifestyle. That feeling is part of the brand for shoppers even when they are shopping other retailers.”

Smaller retailers, like Golda’s, perform a different function and offer an experience the standalones don’t,” Fleischmann says.

“They can curate a range of merchandise and provide broader, less-biased knowledge.

“If a customer is an amateur chef or foodie, for example, she’ll seldom want to buy only a single brand of cookware and implements. And the small-store owner is better positioned to offer an opinion on the best combination of brands.”

Showrooming — looking at items in store then leaving to buy them online or at mass discounters — continues to plague small retailers, Fleischmann says.

“That to me is the real threat to the small retailer. Their only hope for differentiation is having a unique merchandising strategy and unparalleled customer experience to fend off the Amazon-effect.”

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