One of our clients has built up a decent sized e-commerce business from his apartment here on the Gold Coast over the past 3-4 years.
He started with just one- (1) product but has now grown to over 5,000 products.
Because of the many cost advantages of having an Internet-only store he has been able to pass on very significant price savings to his customers. And they love him for it. And his business has grown tremendously well.
Until now.
Put Your Prices Up Or We’ll Close Your Account
What has happened is this. Bricks and mortar stores in his industry (of which there are many) here in Australia have become aware of his site and they guessed that he’d be getting a lot of sales.
Sales that he gets because he offers a fantastic service, is convenient AND provides big savings.
These store owners have gone to the distributor our client buys from, and they’ve said
“Stop supplying this Internet guy or we won’t stock your products anymore.”
My client’s distributor has had no choice but to say to my client “Put your prices up to recommended retail or we’ll close your account.”
Between A Rock & A Hard Place
* The distributor has no choice. As big a buyer as my client is, the distributor can’t afford to have the retail stores not buy from him.
* My client has no choice. The distributor is the biggest stockist in the industry and if he refuses to increase his prices he’ll very quickly find himself without a product to sell.
Te worst bit is this: the poor customer is forced to pay full price for his products because retailers can’t compete with an Internet store and have to apply pressure to the distributor.
It’s an interesting situation without an easy answer. I can see all sides of the issue, but I can’t help but wonder why the retail stores don’t start investing some resources in what they must see is a terrific way to do business.
Cheers
Gee, thought that is classed as price fixing. Go to the ACCC!
Hello
It’s close but not actually price fixing. I’ve been in exactly the same situation with a supplier of eczema products to our eczema web site.
The supplier increased the prices on only us because, in his words, “You’re selling more and making more money than anyone else.”
My legal advice was that the supplier can sell to anyone at any price he wants.
In our clients example in this blog, the retail stores haven’t colluded together and set their prices the same. They’ve just told the distributor why they won’t stock his products.
Brendon