Specialist natural products suppliers and independent health food retailers have long had a symbiotic relationship. Brands and wholesalers have developed the specialist products that give health stores one of their most valuable points of difference, while the retailers have provided all-important shelf space to young brands and supported and nurtured them as they grow into bigger business.
But is this mutually beneficial relationship starting to fray as suppliers ramp up their direct-to-consumer activity? And are respected health food brands stealthily acquiring health store customers from right under retailers’ noses? In short, are we still all in this together?
That’s the question which Elixir Health Foods co-founder, Jason Henderson, asks in an open letter to the trade which he has asked Natural Products News to publish.
“I found the Natural Products Retailing in 2015 Survey in Natural Products News a useful insight into industry trends. While it’s a tricky balance interpreting such information against what’s relevant locally, we all appreciate the benefits of being better informed. Thank you so much.
One point I’d like to raise, an issue equally affecting our livelihoods, is that of our suppliers who act as retailers and sell online. I appreciate this isn’t a problem restricted to the health food sector and by way of acknowledgement, in our small community in Cornwall, the clothes shops, electrical store, bookshop, shoe shop to name but a few all lament the practice of competing for the same customer pound with their suppliers. Many of us however always believed the health food industry enjoyed a higher status with its suppliers, in a relationship grown historically out of an aim to improve the health of the nation, mutual goodwill, and of course commercial benefit. That’s how it always used to be. So, with that point in mind I wonder how far your feedback, in the survey, of ‘biggest threats’ to independent retailing drilled down into the reasons why the ‘internet’ was number one? There are, I think, good grounds for further investigation here, and I urge you to consider looking into it.
Nearly five years ago, in different forums, I flagged up some of the serious problems the internet posed to us. As a business which has traded online since 2000 I was in a good place to see the changes that were unfolding. Few in the industry really understood the implications, myself included, since it was all new and many lacked an understanding of e-commerce trends, such as search engine optimisation, digital marketing, the commercial relationship search engines like Google were introducing with Ad words, pay per click and their never-ending algorithms to alter shopping habits. Similarly, about that time there was a trickle of suppliers and manufacturers experimenting with this Brave New World. The term most commonly bandied about was for “marketing purposes.”
The threat of Amazon and eBay has been on our radars for a while and those trading online are increasingly aware of the Pandora’s Box opened by the internet shops that massively discount, giving away unsustainable margins. Constant price-cutting is a short-sighted strategy taking you down a road of no return. It’s a war that spirals downwards – just look at the supermarkets – not even leading, as some would think, to a victory for the customer.
As independent retailers disappear from the high street where will shoppers go for choice and diversity? Nothing good will come of this. So at what point as an industry will we acknowledge that our suppliers also represent some of our biggest competition? And at what point will our suppliers discover they played a potential part in the disappearance of many health food businesses? There is only so far you can go in developing new markets before you look back and realise your main income stream has dried up. The bad feeling this is causing is leading to changing relationships for many of us, and is only going to get worse.
‘ … at what point as an industry will we acknowledge that our suppliers also represent some of our biggest competition? And at what point will our suppliers discover they played a potential part in the disappearance of many health food businesses?”
About four years ago I personally raised this matter of selling online with a number of MDs of industry-leading VMS and skincare companies and their responses were quite diverse, ranging from the superficial to the hypocritical (“just do as we do, we give away big enough margins”) and in one or two cases, total disregard. It’s definitely a profitable income stream not to be sneezed at, one which is growing as shopping habits change and suppliers’ digital marketing is ramped up. On the one hand is the “deal” and advice to “stock up, lots of advertising to follow,” and on the other are their many websites, some even completely dedicated to the sales of specific products which dominates customer’s keyword search terms. Hmm.
Suppliers have bigger margins to play around with and can therefore incentivise our internet and retail customers better. And it’s a double-edged sword of disseminating useful information and competitions on our behalf, including great point of sale, but then there is the supplier’s extensive marketing information printed all over it. The threat of selling direct is never far away. To make matters even more interesting our wholesalers are getting in on the act, both trading online and selling to Amazon, Ocado, and other market places. Thus, our suppliers and wholesalers are giving away the database of our niche and often unique products to the world at large. No wonder our USPs are shrinking, with excellent customer care being our last real bastion of hope.
‘… our suppliers and wholesalers are giving away the database of our niche and often unique products to the world at large”
In the early days, a number of retailers who could see what was happening refused to deal with suppliers that traded online, discounted heavily and used the market places to sell, but the practice is so rife now there wouldn’t be any left to deal with if that reasoning was pushed to extreme. The practice is worse among some suppliers than others; as always it reflects a spectrum of good and bad practice. There is currently only one supplier I know whose loyalty to the independents is so fierce that they won’t sell online. Yet. At the better end of the scale, if such a condition exists, are the suppliers who don’t discount on the internet, try to encourage their internet shoppers to use the high street, endeavour to reason with some retailers from their suicidal practice of offering massive discounts, use ‘call to action’ buttons to point their customers to the ‘nearest retailer.’ But … at the end of the day … still a wolf in sheep’s clothing? They sell online.
The strong relationship shared with our suppliers and wholesalers is an integral part of our existence and future and one to be treasured and built on. As retailers we cannot take our suppliers on, out-trade them if you will, via internet sales, even with their many ‘deals.’ Any more than we can beat the supermarkets at their own game. With the internet, and most worryingly the control of search engines – especially Google – over our commercial and personal lives, we’re in for a horrendous ride with our stakeholders. Over the years some suppliers annoyed independents by diversifying their income streams into chemists, supermarkets – anywhere money is to be made because the aim of business is, of course, profit. It’s just business. But is the implication of directly competing against us long term, cutting their nose off to spite their face? And has the rot set in too far, or is there still time for a reappraisal of our relationship? Should there be a voluntary standard our suppliers subscribe to, a common design the industry adopts which says ‘I support Independent Health Food Shops – I don’t sell online’, or words to that effect?
It’s an interesting question and unless we open a nationwide discussion with our suppliers, I fear we may all lose out in the end.”
Jason Henderson, Elixir Health Foods
• The September issue of Natural Products News will feature a report on the issues raised by Jason Henderson. We’d like to hear your thoughts, so please leave a comment in the reply box below or drop us an email to [email protected]
