Retail Blog

What wholesale products are independent retailers searching for this week? ProductBlazer, the web’s largest wholesale supplier search engine, can help tell us. The site provides a massive index of over 40,000 suppliers and tracks search queries across a network of wholesale supplier search engines. Summer is coming so we clearly want to lounge in Adirondack chairs, but what is on the minds of the country’s leading independent retailers? What’s hot this week?

Let’s see!

 

Is a slowing economy affecting the types of products that retailers plan on stocking their shelves with? What other products are your competitors planning on selling this summer? Data from ProductBlazer, the web’s largest wholesale supplier search engine can help provide some insight.

Will a newly thrifty consumer turn to handicrafts, sewing kits, and thimbles to reduce their monthly budgets? Will they keep spending on kids dress up parties? Wedding season approaches quickly, and flower girls will need to be outfitted regardless of the state of the economy. And what exactly is unique cheap? ProductBlazer answers all!

The following table shows quickly accelerating searches on ProductBlazer.

 

The prognosticators say that Main Street retailing is dead. The big box stores have ruthlessly driven Mom and Pop out of business to the ultimate detriment of consumers everywhere. The prognosticators are wrong. To see why, take a look at something going on in between retail and wholesale. First, let’s look at their tails. Their long tails, to be exact.

The ‘long tail’ is a statistical concept recently popularized by Chris Anderson in articles and his book “The Long Tail: Why the Future of Business is Selling Less of More”. Being the editor-in-chief of Wired magazine, and having skills that include rigorous mathematical chops, Anderson demonstrates a recurring phenomenon in markets across many industries. Namely, he shows that very often in demand curves one sees that the majority of sales are accounted for by small, niche products or companies. Large sales volumes are predominated by large numbers of small sales added up.

For a particular company, the long tail consists of products that sell individually in low volumes. Amazon is the poster child of long tail business planning. Josh Peterson, now a former Amazon employee, summed it up this way: “We sold more books today that didn’t sell at all yesterday than we sold today of all the books that did sell yesterday.” That is, Amazon makes most of its money selling books every day that no one has ever heard of, and that hardly anyone reads.

For a given industry, the long tail is comprised of companies that individually have low sales numbers. In the $3.5 trillion retail industry it is Wal-Mart, Target, and Home Depot who get all the attention. Indeed, those three themselves account for $500 billion in sales. However, the top 100 retailers have combined sales of just $1.5 trillion. And the top 1,000 retailers have under $1.6 trillion. Most of the rest - almost $2 trillion in sales - goes to everyone else. This is a classic long tail, and it is overwhelming comprised of small, independent businesses. Mom and Pop aren’t doing so badly.

Whether a long tail exists in a company depends mainly upon inventory and distribution costs. Where those are high, sellers will tend to focus on stocking items that have high sales volumes, ignoring the slow movers. Where inventory costs are low, distribution and access to markets become key. Even if it had them all in stock, Amazon couldn’t sell the long tail of books if it couldn’t reach the massive market of low-volume niche buyers interested in them. Of course, the internet is the driving technology that makes that market efficiency possible.

Whether a long tail exists in an industry depends mainly on market efficiency and barriers to entry. For instance, there is no long tail in the cable industry. It’s simply too hard to start your own cable company. It’s also a relative hassle for consumers to make switches, assuming they have a choice. Retail has a long tail because practically anyone can open up a shop, and consumers can shop anywhere they like. Wholesale goods is another industry with a long tail. With some 100,000 wholesale suppliers, most of the $2.3 trillion sold at wholesale goes to the bottom 99,900 businesses.

Wholesale suppliers sell to retailers. To what degree do their two long tails intersect? Again, it depends on market efficiency. Large retailers find it ridiculously easy to find suppliers, who line up at their doors hoping for a chance to sell. Small retailers don’t have it so easy. For decades their main way of finding suppliers was through aggregation services like rep firms and trade shows. These are expensive and/or time-consuming, and ultimately meant they did business with a relatively small number of large vendors. It was only the larger guys who could afford to have many small vendors. The two long tails didn’t meet.

In much the same way the internet enabled the long tail phenomenon of Amazon, it is also enabling the intersection of the long tails of retail and wholesale. With vertical search engines like ProductBlazer, small retailers have access to tens of thousands of small suppliers and their products. With credit card transactions and email communication, the cost for small retailers of doing business with a larger number of small suppliers has fallen.

This is nothing short of a mini-revolution. Consumers can now go to a big box store to buy all the things that everyone else buys, at competitive prices. They can also go to their favorite small retailer and get something that no one else buys, at great margins for the retailer.

Mom and Pop will never again sell Ivory soap as cheaply as Target, but then again, they should be smart enough now not to try. Instead, they are thriving by having a detailed, intimate knowledge of their customers and the ability to find and deliver unique, niche products to them that Target would never touch. This is Mom and Pop’s own niche, and their access to the long tail of wholesale suppliers ensures they’ll occupy it for years to come.

 

Those of you not living on the moon might have noticed this year’s collision of Halloween with Christmas. We have long grown used to retail venues starting their Christmas promotions ever earlier, with old jokes about retailers eventually starting in January. However, this year marks a dramatic acceleration of this trend to what I think will be its extreme.

There was once a time when the Christmas shopping season was mostly limited to December. Thanksgiving, then usually the last Thursday in November, was the traditional start. Depending on how that last Thursday fell, there might be as few as only 24 days of shopping. Thus in 1939, with the depression lingering, FDR moved Thanksgiving back one week to extend the shopping season for retailers. This now meant that the Christmas season could be as long as 40 days.

For a long time this was enough. Indeed, it was somewhat unseemly for retailers to promote Christmas ahead of Thanksgiving. Macy’s established the tradition of Santa himself kicking off the Christmas season at the end of its Thanksgiving Day Parade, and most retailers and retail venues observed this convention. It was tidy, and helped give us the notion of ‘Black Friday’.

Somewhere along the way this all changed. Most likely, some retailer brought out the Christmas cheer early one year and it paid off. The next year more tried it, and before you know it my kids are wearing their costumes to see Santa. But like states jockeying to have the earliest possible presidential primaries, it’s no longer so much about getting the jump on the competition as it’s about just not losing out.

This year major retailers such as Wal-Mart and Toy-R-Us started their ‘Black Friday’ promotions some three full weeks ahead of Black Friday itself. Home Depot and Lowes’ had Christmas trees out in late September. Christmas decorations were in malls in October. We all expected to see Christmas stuff earlier this year than last, but it seems like everyone has jumped ahead a few years.

The main explanation for this is the expectation of a bad retail year. Oil is up, the war drags on, credit is crunching, housing is down, the dollar is down, there are no blockbuster products, etc. Indeed, the National Retail Federation predicts retail sales growth of just 3.7% over last year, compared to a 4.8% average. Actual returns so far suggest it will be even worse than that. But hanging lights early and piping in three months worth of the Trans-Siberian Orchestra won’t help. And it might even hurt.

The Christmas shopping season occupies fully one quarter of the year now. There is consumer desensitization, like the numbness from too much rubbing. Christmas loses its magic, and it ceases to be the emotional draw for shoppers that retailers need it to be. Rightly or not, I predict retailers will perceive that this year’s disappointing numbers were due in part to Christmas Overload. You’re hearing it here first. Next year, the conventional wisdom will be that the shopping season should be shorter.

The one bright spot in all this is, oddly, Thanksgiving. Remember that one? It’s one of the holidays that gives us the phrase “the holidays”. Whereas one could once count on seeing plastic pilgrims and turkeys in stores for at least a week or two, nowadays they’re nowhere to be seen. Outside of grocery, retailers have all but given up on Thanksgiving as a merchandising opportunity. Perhaps this sanctifies Thanksgiving, making it a more meaningful holiday.

So for now, have a Happy Thanksgiving! And have no worries - there are still plenty of shopping days left.