Shopping Online Directly from OEMs
There is one thing about the evolution of e-commerce that continues to bug me. I just don't understand why product OEMs don't operate their own online storefronts.
A few days ago, I decided to search for a new impact vest for my upcoming kiteboarding trip to Cabarete. I specifically wanted the
North Kiteboarding Impact Vest as I had tried it on last summer and liked the look & feel. So, as with anything, I started my shopping by typing in the appropriate key words in to my trusty search engine of choice.
The results came back listing about 10+ different retailers based in Oregon, South Carolina, Florida, North Carolina, California, the United Kingdom, etc, etc. Some of these retailers had inventory information on their site and others didn't. From what I could gather, most of these sites were operated by brick & mortar stores rather than being pure-play online businesses. So, given that I knew that this item had been on back-order for some time (I had inquired about this same product several months ago), I decided to email a handful of these retailers (six, to be specific).
"Hello. I'm desperately trying to get my hands on a North Impact Vest. Not sure if your site is up to date, but could you check if the North Impact Vest for Seat Harnesses (in Large) is available? Thanks, Charlie"Only one of the retailers had it in stock and could ship right away. The other five emailed me saying they would check with North and get back to me. A day later, they all got back to me say that they could get their hands on one from North and have it shipped to me. One of them actually forwarded me the email response from North to his inquiry.
As an online shopper, I really had no affinity for any of these stores as none of them were physically near me. So, my purchase decision analysis was based entirely on (a) price and (b) availability (and not necessarily in that order). Ultimately, I ordered from the first (and only) store that responded with the product in stock.
Here's what I don't get. Why doesn't North want to take control of their brand? More importantly, if their retail partners are merely taking orders and North is drop shipping than why give them such a meaningful cut? All of these retailers are merely middlemen and the internet has no need for middlemen. I completely understand an OEM's desire to support their brick & mortar retailers, but the internet is a different distribution channel where price & shipping rule the day.
Physical store retailers command and deserve margins of 30-50% from the sale of third party products. That makes complete sense as all of these retailers have to pay for sales personnel and pay for rent on the physical space. And, many of them have to factor in distribution, warehousing, and inventory costs. Lastly, many/most brick & mortar retail operations have their own brand which requires marketing investment to support.
Shopping or selling online is a different game which should be played differently. Amazon is the only online retailer that even closely resembles the offline world. Most other e-commerce players play the game differently (
eBay,
iTunes,
NetFlix, etc). The internet is much more akin to direct mail and direct response television than it is to traditional retail.
So, again, my question is, why don't the major OEMs operate their own online storefronts? They could operate these storefronts merely as a service to their brand-loyal customers and not step on their distribution partners toes by never selling product for less than MSRP.
Dell sells online and in stores.
Apple does too. In fact, in the kiteboarding world,
Best Kiteboarding does too. Interestingly, these are some of the most successful companies in their respective product categories.
In many niche categories where traditional brick & mortar retail still dominates the distribution channel (such as kitchenware, home & garden, exercise equipment, children's products, sporting goods, etc), specialty micro shops have taken to dominating the online shopping experience. Companies such as
Mercantila,
NetShops,
CSN Stores, Blue Lava Group,
Specialty Retail Shops, etc, have taken a sizeable presence in certain product categories by focusing squarely on (a) search engine optimization and (b) consumer reviews & customer experience. These kinds of businesses clearly marginalize the online portals of traditional retail brands like Macy's, Sears, Office Depot, Walmart, etc. So, why should OEMs let their branded products be peddled entirely based on price. It's not in their best interest. The web is not only a medium for brochure-ware; it's also a medium to connect, interact, & serve customers.
Given consumer reviews are prevalent and can be found across hundreds of content-focused or affiliate sites such as
Epinions,
ConsumerSearch,
ConsumerReports,
CNET,
Edmunds,
Angie's List, etc, products and brands can rise & fall on their own without the need or distraction of an intermediary. Comparison shopping engines such as
Google Products,
Price Grabber,
Shopzilla,
Shopping.com,
NexTag, and
BizRate make it super simple to find the cheapest trustworthy merchant.
There is a lot to learn from the successes of direct selling online by the likes of
prAna,
Under Armour,
Dell,
Sony,
Apple, etc. These companies own their brand image and they control their customer experience as best they can, but they also support their brick & retail partners fully.
It's time for brands to step up to the plate and control their destiny online.
posted by Charles @ Wednesday, April 01, 2009
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Congress is Clueless
I just got around to reading the actual bill that was presented in Congress on Wednesday. I'm embarrassed by how overly simplistic the 37 page document is. Read it
here.
The document was basically a term sheet with standard legal gobbly-gook around the edges. All things considered, for 37 pages, it as a pretty weak term sheet. The document has little/no substance on restructuring or milestones and clearly demonstrates how incompetent our Congressional leadership is. Mainly because these guys are debating the nits & nats of something that has no teeth. I could have written this bill in one page (although I wouldn't have).
My favorite part was this ridiculous clause:
During the period in which any financial assistance provided under this Act to any eligible automobile manufacturer is outstanding, the eligible automobile manufacturer may not own or lease any private passenger aircraft, or have any interest in such aircraft, except that such eligible automobile manufacturer shall not be treated as being in violation of this provision with respect to any aircraft or interest in any aircraft that was owned or held by the manufacturer immediately before receiving such assistance, as long as the recipient demonstrates to the satisfaction of the President’s designee that all reasonable steps are being taken to sell or divest such aircraft or interest.
That took up half a page. I find it pathetic that through the entire document, which resembles an overly-wordy standard financial/equity/debt term sheet, they include this provision. There's very little mention of other operational targets, but, hey, let's make sure they fly commercial.
posted by Charles @ Friday, December 12, 2008
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Auto Industry Bailout
This is ridiculous. I see absolutely no reason for Congress to step in and bailout the domestic auto industry. Why didn't Congress bailout Webvan in the 90s? What about Yahoo? They could use some cash. Global Crossing? Enron/PG&E? What about the hundreds/thousands of other small businesses that are struggling because of the economy? Heck, what about the hundreds of businesses that are failing because they're poorly run. Where do we draw the line?
The Big 3 are failures and have been since the 70s. The domestic auto business is structurally flawed (dealers, unions, overcapacity, and over-extended) and has proven incapable of innovating (poor design, terrible quality, no fuel-efficiency improvements, and out of touch).
The United States purchases 12-16 million new vehicles per year. Market share of the Big 3 has declined precipitously since the 70s and that has nothing to do with the economy. The companies are failing because they have been mismanaged over decades. Period. Full stop.
posted by Charles @ Wednesday, December 10, 2008
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Letter to Senator Obama
Congratulations on your milestone victory yesterday. I can’t begin to express how proud I am of you and our country on a whole. You ran a flawless campaign and have inspired millions across the United States. Although your election was monumental, now comes the hard part.
You’ve certainly inherited a mess. Our nation is embroiled in two wars: one in Afghanistan and one in Iraq. Our financial system is in shambles, ranging from continuous Wall Street meltdowns to the Political entangled Fannie/Freddie to soaring American household debt. There is a lot to fix, and it’s not going to be easy.
So, if I might impart a few ideas for you to chew on as you plan your move to Washington DC:
Build a Bi-partisan Administration. Take time to select the right cabinet members to help you forge a better future, not just focusing on tomorrow, but also on the ten years to come. Look to bring on opposing views to your administration – balance is key.
Simplify our Tax System. Reagan started this in the 1980’s, but there is still a ways to go. There are clear needs for immediate tax hikes (within reason), but another source of capital can come from simplicity. Sit down with Steve Forbes and hear him out; maybe even appoint him to your Cabinet. Be careful with your treatment of capital gains taxes. We must encourage investment and entrepreneurial spirit. Small businesses run our economy and many start small businesses with the hope for eventual payouts.
Be Careful with Regulation. Poor financial regulation is, in large part, what got us in this financial mess. Government oversight and regulation is a two edged sword. As you look at fixing the chaos we’re in, remember that our system of beliefs is rooted in small government and freedom of business.
Approach Healthcare Reform Cautiously. It’s clear that our system is broken, but there are many lessons to be learned from the drawbacks of nationalized healthcare in other countries. Countries with health systems based on greater government control tend to have more obstacles to care, such as long wait times, rationing and restrictions on the choice of doctors. Be wary of rampant administrative costs. Regardless of the outcome, at a minimum, we need to focus more on preventive care rather than reactionary medicine.
Support the Freedom of Choice. Our nation was built on the premise of the separation of church & state. Uphold this. Americans should have the right to choose. Abortion is not a religious discussion. Gay marriage is not a government’s decision. We are a nation of immigrants with different beliefs, backgrounds, languages, and should all have the right to not see our government impose on those individual rights.
Invest in Alternative Energy Research. Release us from foreign energy dependence. This will take time, but we should start now. We don't even need to spend that much on research to make simple changes to our energy policies. In addition to alternative energy, we should work on solving on foreign dependence now by migrating to existing solutions, even if not perfect. Drill at home, nuclear energy, etc. The policy needs to be comprehensive and have a 20+ year outlook. Incentivize the auto industry to innovate.
Maintain Free Trade. We live in a global economy. Imperialistic barriers cannot make any sense moving forward, however beneficial to the American worker in the short term. Competition will only make us stronger and better in the long run. Since our early days, this has been one of the main tenets of our economy. The colonies which became the United States generally supported free trade; indeed British restrictions on trade were a major factor in the war for secession.
Reform Campaign Finance. There is no longer any reason to for our electoral college system to exist. But, understanding that changing our electoral process would be a challenging undertaking given the embedded political interests, I encourage you to do what’s right and support substantial campaign finance reform. We, as Americans, do want change. And, we also want choice. Having to choose from two parties not only minimizes the potential change we see, but also narrows the field of possibilities.
Focus on Education. This is our future, our children’s’ future, and our nation’s future. Do not spare a dime on this matter. Come up with a plan to improve the quality of our teachers and our school systems. Sit down with Mark Warner (VA) and hear him out. Not only would investing in better public education would prove critical to helping the United States emerge from tough times stronger than ever, but it is the foundation for innovation that has driven us during the past century. Improved education would help us elect better officials, make smarter decisions, live healthier stronger lives, and cope with change as it’s needed.
Support our Immigrants. We have always considered ourselves the “melting pot,” driven by the rich tradition of immigrants coming to the United States looking for something better and having their cultures melded and incorporated into the fabric of the country. “Give me your tired, your poor, your huddled masses yearning to breathe free…” These are the people who are, have been, and will be the driving force of our country.
Listen to the People. During your acceptance speech you stated: “I will always be honest with you about the challenges we face. I will listen to you, especially when we disagree.” This was quite possibly the most critical statement you have made, in my opinion. If you can stick to this, I believe you will, I have no doubt that you will succeed.
I hope this letter gets to you and that you can, at least, acknowledge one more opinion out of the millions of opinions that you’re receiving every day.
posted by Charles @ Wednesday, November 05, 2008
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It's Time
The
Economist published a fantastic commentary on the US Presidential Election last week that is a very worthy read. It's an extremely well articulated and thoughtful analysis on the election, the candidates, and their respective strengths & weaknesses, most of which is hard to dispute.
posted by Charles @ Wednesday, November 05, 2008
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Memory is Fleeting
Just yesterday, a friend of mine sent me this New York Times article dating back to September 1999. Yes, 1999. Interestingly, the article,
Fannie Mae Eases Credit to Aid Mortgage Lending, discussed how Fannie Mae decided to ease the credit requirements on loans that it would purchase from lenders after coming under pressure from the Clinton Administration. Ahem.
Humorously enough (if we can even provide some levity to the terrible state we're in), the writer of the article can proudly say, I told you so.
In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's. "From the perspective of many people, including me, this is another thrift industry growing up around us," said Peter Wallison a resident fellow at the American Enterprise Institute. "If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry."
How soon we forget.
A lot of people want to point fingers and place the blame, but I'd like to point out that "Wall Street" or "Investment Banks" are not singular entities who control policy or team under a joint modus operandi. The blame can be squarely placed on policy makers here. And, given the date of the aforementioned article, I'll let you choose which policy makers we're talking about. A lot of things have gone wrong over the past years but, generally speaking, poor execution comes from poor leadership & subpar planning.
One thing is for certain (in my humble opinion), bigger government and more policy will not help us get out of this mess in the long run. Frankly, it's what got us in this mess in the first place.
posted by Charles @ Tuesday, September 30, 2008
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Mauldin on Energy
John Mauldin comments on the US energy policy in a recent newsletter subsection called
Some Thoughts on Energy. This is a great piece. He presents some great analysis and solid opinions. This passage sums it all up:
Either we are going to see the economic life sucked out of this country, or we can respond by doing everything that is in our power. There is not a shortage of energy. There is a shortage of leadership to produce the energy we need. A real energy policy would also have the benefit of boosting the beleaguered dollar.
Net. Net. We just need to start investing today, across the board, in all facets of cleaner energy, and in domestic natural resources. Period.
posted by Charles @ Tuesday, August 05, 2008
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Alternative Energy Research
Leo Tolstoy once said: "The struggle with evil by means of violence is the same as an attempt to stop a cloud, in order that there may be no rain."
The US Government spent nearly $440 billion on military expenditures for the Department of Defense during fiscal year 2007. In 2008, the proposed spending increased to over $480 billion for the same subject matter. Of that amount, from what I've read, the US spends roughly $67 billion annually on this war.
In contrast, the US spends a mere $3 billion on energy research each year, according to the National Science Foundation. DARPA, the Defense Advanced Research Projects Agency and the creator/inventor of the Internet (computer networking and hypertext) amongst other things, manages a roughly $3 billion budget as well. This is the agency of the US Department of Defense that has been responsible for funding the development of many technologies which have had a major impact on the world, in past years...
President Bush currently says that he is seeking about $10 billion for alternative energy research over the next five years as part of his proposal to reduce U.S. gasoline usage by 20 percent by 2017. You have got to be kidding, right?
Albert Einstein once said: "The problems that exist in the world today cannot be solved by the level of thinking that created them."
It doesn't take a genius to realize that you're always better off solving the problem at the root cause (foreign energy dependence) rather than patching solutions (imperialism and aggressive foreign policy). This is such a exhaustive subject, but I'm hoping that the more we mention it, the more likely we spend our tax payer dollars on fixing the problem sooner rather than later.
We don't even need to spend that much on research to make simple changes to our energy policies. In the 70s, France migrated substantially away from oil and now generates about 75% of its power from nuclear power plants. That's worked successfully for them for nearly 30 years. In the US, in contrast, over 70% of our energy is derived from coal, petroleum, and natural gas. Although nuclear energy isn't ideal, it doesn't produce the air pollution that burning natural resources does and it unshackles us from a dependence on the Middle East. And, the technology is here now; including impressive solutions for nuclear waste remediation.
What do you think would happen if we tripled our annual energy research budget? Would we come up with a better solution than ethanol sooner? Would we have a better solution to our high consumer gas prices than the Prius? Possibly, probably... Considering the relative spend in the context of our war funding, it would seem like a smart diversion of funds if you ask me.
posted by Charles @ Monday, June 23, 2008
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