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Kick to the Curb, Cut a Deal and More Responses to the Case of the Direct-to-Consumer Deal

Retailers share how they would handle a pet food brand introducing a direct-to-consumer loyalty program that could undercut their sales.

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JOE HAD JUST finished putting up new tags to reflect the most recent price increases for pet food when Max, a longtime customer, came into his store.

ABOUT REAL DEAL

Real Deal is a fictional scenario designed to read like real-life business events. The businesses and people mentioned in this story should not be confused with actual pet businesses and people.

ABOUT THE AUTHOR

NANCY GUINN is founder and president of Dog
Krazy Inc., an award-winning pet supply store in Virginia with six locations. Also a clinical pet nutritionist, she consults with veterinarians and pet parents alike. Nancy shares her life with business partner and husband Chris, and their pets Sushi, Pork Wonton, Stirfry Fatguy, Tala, Jimmy Dean and Max.

“Hey, Max,” Joe said, walking to meet him in front of the kibble Max regularly bought through the store’s loyalty program. “Let me take a bag up to the register for you.”

Max looked at the new price and replied, “Actually, I got an email this morning from the company offering the same ‘Buy 12, Get 1 Free’ deal on direct orders, and the price is lower, too.” Max took out his phone to show Joe the email.

Joe said, “That’s interesting. The company just emailed us price increases.” Joe looked at Max’s phone and saw the offer and pricing. “I will match that price, though, if you would like to still buy your food from us.”

Max responded, “I really appreciate that, but the company also offers free shipping, so I’ll save time and gas, too, by buying direct. But don’t worry, I’ll still come here for toys and treats.”

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Joe helped Max pick a few other items for his pets and checked him out, all the while wondering just how often Max would be coming into the store going forward without the need to regularly buy food.

“Thank you for being a longtime customer,” Joe said as he bagged the purchases, “and be on the lookout for an email from us with next month’s specials and information about some fun events we have coming up.”

After Max left, Joe searched his inbox for an email about the company’s new direct-to-consumer loyalty program. Nothing. He then went to the brand’s website and signed up just as a customer would. Joe needed more information about how the program worked. No matter what, he was going to take a huge hit on sales of this company’s food.

The Big Questions

  • Should Joe stop selling the food completely?
  • Start transitioning customers to another brand, one that doesn’t offer a direct-to-consumer loyalty program, with the ultimate goal of dropping it?
  • Email customers who buy the food from him, offering to price match and provide free delivery? Even though it would severely cut into his margins?

 

Jodi E.
Bradley, IL

If offering the same deal severely cuts into my bottom line, I wouldn’t offer it. I would immediately contact my rep. If no rep, then someone in customer service. I would insist on perks, deals or sales that would help me retain these customers. If the company won’t work with me, I would begin phasing out the lines and steering customers toward manufacturers that still care about independent stores. Unfortunately, this has happened way too often lately. I’m not naming names, but a couple of brands have remained and continued to be promoted, while others have been unceremoniously kicked to the curb.

Diane B.
MORRIS, MN

Keep the food, but think outside the box: What else can you do to bring in foot traffic? I offer grooming. I make barkday cakes for pets’ birthdays. I have a boutique with cute trendy pet clothes. I offer a discount if folks adopt a pet from the humane society. I offer a discount to college students in town. The online retailers will eventually kill off small pet stores, but until then, I won’t go down without a fight.

Frank F.
FARMINGDALE, NJ

We simply respond to the manufacturer that we understand their wish to offer as many channels for the consumer to buy their product as possible. We also recognize that there are areas that don’t have brick-and-mortar retail coverage for a particular brand, thereby necessitating this alternative channel. That being said, we request that they sell their product online at MSRP and not at a discounted price. We also let them know that they cannot be both a partner and a competitor in their relationship with us. We request that they pick one … and choose wisely! Their response … or sometimes nonresponse … will determine our next move.

Keith R.
SEABROOK, TX

These practices take a bite out of our business, with each bite adding to a total devastating to our profitability. The question is not, “Do we stop selling a food?” That is what we used to do. Look at how many good companies we no longer consider. Instead, reconsider which products you carry from these companies. I will sell bestsellers, but why support losing lines?

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Brett B.
ERIE, MI

As a manufacturer, I believe I understand. Covid, the price of gas and online megastores have forced a change in the market. As such, people now are less inclined to “go out shopping.” They want and have become more accustomed to having necessities shipped to their door. As well, distributors are becoming fewer, their overhead higher, and they’re being replaced by the online megastores. The result is that some manufacturers are forced to find ways to maintain their margins, by selling online and skipping the middlemen. However, a smart manufacturer should realize their highly valuable partnerships with their brick-and-mortar stores and not undercut them. Talk to the manufacturer and inform them that if you can’t make an equal value proposition to your customer (and still keep your profit), you’ll need to drop their brand.

Shari W.
EUFAULA, OK

If a company offers direct-to-customer programs or takes my client info, I will change brands. It is so hard to launch and promote new brands, the companies should view us as partners.

Doug S.
NEW CITY, NY

I get that manufacturers go omnichannel in today’s world, but if they undercut us as a partner, they would have to get to MSRP or MAP or be gone. As someone who has sold pet foods for over three decades, I will no longer support brands that erode my margins or steal my customers. We consider that a toxic relationship, and our core values don’t align with that mindset. We prefer to partner with vendors who support us as we support them, and neither party tries to leverage up. In relation to the customer here, if Joe offers to price match and even deliver for free, and he still balks at the offer, then Joe must ask how loyal was that customer? Life’s a two-way street.

Alexis B.
SALT LAKE CITY, UT

I would call the manufacturer rep and find out what the heck is going on and if their loyalty to small retailers is shifting and they no longer plan on supporting our efforts. If that is the case, I would phase out the line. I would hope they would make us an offer that would compete with their direct-to-consumer program and pricing. Another thing I would think about is whether we really do well with this brand and even need to carry it.

Diana H.
ROCHESTER, WA

Manufacturers have forgotten how they got to where they are. It’s so frustrating, as indies are being backed into corners. More manufacturers are going direct. Navigating it all is exhausting.

Julia B.
CROFTON, MD

I would transition. Price matching only leads to lower margins. You can end up taking a loss without careful consideration. Some lines are not worth offering when you come into direct competition with the manufacturer.

Tim H.
SILVERDALE, WA

I would definitely start switching all customers and drop them like a hot potato. When customers ask why, I would tell them that the company is no longer trustworthy and doesn’t meet our vetting process. They are undercutting the channel and stabbing their retailers in the back by not communicating or being transparent.

Brett S.
MARKHAM, IL

As a brand owner, first that should never happen, and second, assuming you have a brand rep, let them know — there should be a mutual resolution. Prices on a brand’s website should never be lower than the MSRP of the food.

Rebecca M.
CLARKS SUMMIT, PA

Unfortunately if the company is hammering the consumer with offer after offer, Joe is ultimately a walking commercial for this food company. He’s taking up precious time and shelf space for a company that’s just looking to cut him out of the relationship in the end. I wouldn’t reward that maneuver with further sales of their items.

Kristi M.
SURPRISE, AZ

I’d keep it only online for special orders.

Ramie G.
EVANSTON, IL

I can’t drop every brand that has decided to compete directly, but I can see what the rep can offer so we can match their direct-to-consumer offers. If the rep won’t help, then I would seriously reconsider how much space the brand gets in my store. Indies have built demand for most brands, so manufacturers need to rethink the direct-to-consumer model. When their customer needs something else, they will come to my store and I won’t carry or recommend their products.

Jennifer Moore B.
NORTH RIDGEVILLE, OH

This is a no-win situation. Price matching will cut the profit margins, and you would have to offer free delivery, too. I would start changing every customer over to another brand and kick the company out the door.

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Susan N.
CHESTER, NJ

It’s difficult to say without additional information, but I do not necessarily think he should drop the brand for this reason only. I think many of his customers will continue to buy the food in his store unless there really is a dramatic difference in price. I do not think he should try to transition customers away from the food for just this reason. It’s just self-serving, and as a customer that would bother me. He certainly could start moving away from the brand. I think he really has to protect his margins, so he should not offer to price match and should not offer free shipping. Brick-and-mortar stores have a value greater than the price of one dog food brand.

Jodi M.
CORAL SPRINGS, FL

I think what these companies are doing is truly hurting us. I don’t understand. If we stopped selling all the foods that these companies are doing this with, we would have no food.

Lorin G.
SPRING, TX

First, see how many of your clients this affects over the next few months. If it’s barely impactive, continue as usual. But also, light the brand up, see what they’ll do for you to be able to compete. If it’s less than satisfactory, start transitioning clients to something else for your own protection, even if you continue to sell the brand. Twenty years ago, I implemented an in-house loyalty program to be utilized simultaneously with brand programs, allowing for double dipping of rewards. Then over time, I proceeded to get off-tier/contract pricing. This was long before all the direct-to-consumer crap started, but I rarely lost a customer when it did. While many view an in-house program paid for by the retailer as a cut in profits, the referrals and constantly increased traffic make it worth it. You can put your advertising budget towards it as well as potentially other budgetary line items.

Theresa S.
MONTGOMERY, AL

We are facing this same problem with some of our brands. I am trying to find foods to replace the brands that are poaching our customers. We indies work too hard to promote brands only to be burned by them. I haven’t stopped selling the foods completely as we have a couple of customers who choose to support us in spite of what the brands are offering directly to them. We love and appreciate when our customers are able to continue supporting us, but if they are open to transitioning to another brand we do start moving them over.

Stephanie S.
AMARILLO, TX

I would be contacting my sales rep at the company and either ask them to buy the food back and or figure out a way for people to come in. If they didn’t want to support us any longer, I would discount the food and stop carrying it and look for a better option. I would also look at what that customer had bought from me besides dog food for the past few years. If it was just kibble, I wouldn’t put effort into it. If they bought toys treats, etc., I would start sending emails offering a treat of the month or something else and mail the food to them for a small flat fee. I realize it’s easier to keep a customer. I might also remind them that supply chain issues haven’t resolved.

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