Independent Brick & Mortar Retail Stores, Greed and the Amazon Effect

After lunch one Saturday in Princeton, NJ a friend and I recently walked over to a store that sells unique wares from around the world. It’s the type of store you might find in a resort town selling an eclectic mix of hippie and cultural items. This is totally a store people browse in and not so much make a purchase. This store is approximately 200 Sq. Ft, it’s tiny, but packed with international odds and ends. I didn’t go in there with intent to buy, but I had bought some nice scented oil in there two years prior so it was worth checking out.

After browsing, I asked the store owner, whom I had met previously, if she had any elastic hair scarves, ties or wraps. She came from behind the counter and handed me a little bin that had some bohemian style hair scarves with elastic. I liked them. The colors were a bit faded, but I liked the style. As she handed me one to look at, I noticed the price was $13. These were foreign made headbands, some said made in India and others in Indonesia. They weren’t individually packaged. As a business consultant I recognized her cost for each one couldn't have been more than $2 each and likely much lower. A markup to $13 seemed steep.

She asked me to try one on, but I declined (I mean how many people had tried on before me?) Quite frankly the price tag was turning me off. I found one with no price tag, because I am a consummate negotiator I made her an offer, “ This one has no tag, I will take it for $10,” I quipped. The storeowner responded, “Yeah sorry, these are $13 each.” Without hesitation I said, “Oh well maybe next time,” as I placed the one in my hand back in the basket and led my friend out of the store.

As we stepped out of the store, I asked my friend if she had noticed how quick I was to put down the wrap when the store owner declined my offer to pay $10 for something she had marked up 8 times already. My friend said, “Well now you can just go Amazon and find them.” I said that was exactly my plan. On my Amazon app I tried a few different search combos for ‘boho elastic wrap ‘ and finally I found some. The same style as I saw in the store, but in more brilliant colors and oh yeah the price! The Amazon seller was offering a 10 quantity pack of wraps in assorted colors for $15.99. That would make each wrap only about a $1.64 with tax! I added them to my cart and two days later (thanks to Prime) I had my lovely wraps (pictured above in the title image above.)

LET’S RECAP

I was willing to pay $10 for one wrap and the storeowner wanted me to pay $13. Meanwhile an Amazon Seller had a 10 pack of the same item in assorted colors for 8 times less. There are two winners in this story – me – for getting more for my money and the Amazon Seller.

The brick and mortar storeowner thought she was winning by selling something she clearly bought for way under $2 wholesale at an overly inflated price. To be honest, if she was offering the wraps 2 for $10 I would have bought them from her because I was standing there and it would have been a fair price in my opinion. Nevertheless I ended up getting more of what I wanted for less.

The moral of this story is if you have a brick and mortar store – you need to be keenly aware of the “Amazon Effect.” Your customers have so many choices so when you get one on the hook – you should make it easy for them to buy from YOU. Imagine if the store owner responded to my $10 offer by saying “Hey I will give you two for $15.” I would have bought them because she was working with me and showing me that she wanted my business. Most importantly she would have made me feel like I was getting a good deal. But in her effort to operate like she was Wal-Mart – she stuck to her inflated price which backfired on her. In the end she missed a sale, a sale she probably needed given that she doesn't have items that people are falling over themselves to buy.

You can’t stop people from browsing in your store and then going online to find the exact same items for less. BUT you can make them feel good about doing business with you directly by giving them fair pricing and amazing customer service. If you treat your customers like they are foolish idiots by marking up your merchandise eight or more times you will feel the pulverizing Amazon Effect often.

Always price fairly and be willing to negotiate when appropriate, remember your livelihood depends on it.