IMPORTANT changes in Hancock & Moore-Jessica Charles-Councill furniture AUGUST 1

[hglaber]

I think we're seeing a little of the forum effect here - the same one that makes car enthusiasts think everyone wants diesel stick shift station wagons and 400 horsepower family cars because everyone (on the forum) wants those.

However, the vast majority of furniture buyers are not doing so long distance. So H&M looks at their sales, and thinks (probably correctly) that if a dealer selling 20 pieces a month gets frustrated when five people come in and try to shop an Internet quote, thinks rightly or wrongly that soon everyone coming in will do the same, and drops the line for another with more protective policies favoring the local dealer, H&M loses 20 sales per month. Copy those protectionist policies, and they might, at most, lose 5. I suspect distance sales are a small part of their volume, but a major irritant to those dealers that don't compete in that market.

My only issue is what Duane mentioned - the selective application of the minimum price. The Apple example is a useful one - I can buy a laptop from the Apple store, or Apple's web site, or Amazon, or my local reseller. Due to minimum price rules, the cost is about the same. Many dealers may not be pleased, especially with Apple competing by selling direct, but at least they are not competing on price. That makes ot easy for me to buy from the local independent reseller, where i get the type of service I prefer.

Had H&M done the same, the delivery charge and inconvenience would have still been a justifiable (IMHO) handicap, so if the B&M lost the sale, the obvious question would be why? Certainly not price. So you need to fix what is obviously broken, or maybe you don't deserve those sales. Being one of The Keeping Room's customers because my (not really all that) local dealer's sales rep knew little of the line, and tried very strongly to steer me towards things they had in their warehouse (first a Lane, then Randall Allen, then finally H&M but only T&C pieces) I know web sellers can compete on more than price.

But H&M does have to protect their bread and butter, which at this point is B&M dealers. This is one way to do it. At least they left a small loophole (dealer can sell at any price in-store). For my next piece (probably a sofa), there's a slight chance I could pay a visit to D.C. since I've never been there. A slightly better chance I might buy from the new, truly local dealer (although I have concerns about them), and a fairly good chance the small, long-established Smith Brothers dealer (I think they just picked up BY as well) 4 blocks from me will get the deal. So be it. That's the nature of capitalism.

[cuse69]

* I have no issue with a minimum selling price for their product. You will see this in a number of consumer products and its legal to do so as per a 2007 Supreme Court Decision. A Rolex or Cartier watch, for example, are virtually impossible to get at a discount. So are things like current Apple products or a Dooney and Burke purse. However I was not quite prepared for the high level of minimum pricing at 35% off MSRP. And the kicker of course is that in the Brick and Mortar stores themselves the policy is not in effect for customers that walk into a store to make a purchase. For example, If John Doe calls me from Minneapolis MN to place and order for a $ 10,000 MSRP Sofa I cannot sell to him at less than $ 6,500 plus shipping (35% off MSRP). However, if John Doe gets on an airplane from Minneapolis and flies into Reagan National Airport, then drives to my store from there, I can sell to him at 50 % or 60% off MSRP while he is in the store and still drop ship it to him. That is not a violation of the selling policy. I'm not sure how that is going to be enforceable.....

Duane,
I would suggest that not many customers will actually get on the plane to visit your store to save a potential 15% that becomes much less after their expenses. In addition, as your long distance sales shrink you may find that your local in store margins may need to increase to offset the volume of sales lost. In essence the policy may become self policing by it's nature.
Eventually H&M will loose sales as net-net the overall average sales price will increase, driving many customers to the next lower quality product like BY or other product brands that allow discounts via the Internet. Likely BY or some new additional brands will become much more significant product lines for your business. I own both BY and H&M and enjoy both product lines and many of your customers will find the increased price differential between the two lines to advantage BY in their purchasing decisions.

The ability for Rolex, Cartier, Dooney & Burke and other quality brands to successfully enforce minimum pricing has some unique aspects that H&M does not share. First and foremost is the concern about fake goods for Internet sales because of ease of manufacturing fake watches of purses that is not nearly as easy with furniture. This discourages many from buying discounted Rolex, etc. on the net. Secondly, an Internet order of H&M is custom ordered and drop shipped from the factory or delivered by your truck rather than a warehouse, further giving comfort to the buyer of authenticity of the product. Also, there is a perception that certain fair price traded brands have a measurable and unique quality or reputation that warrants the non-competative aspect of minimum pricing. While H&M makes a great product, it does not have the same brand status or uniqueness with the general public as the examples sited.

One final comment regarding the changing marketplace and brick & mortar vs. Internet. I would suggest that H&M needs to understand that the very customer it serves with it's own Internet marketing (website, emails, etc.) wants to use the Internet for product education, convenience, and free market competition. It's a new world and the Keeping Room has very successfully adapted to serve it's customers and increase H&M's sales. H&M and it's B&M network needs to do the same if they want to prosper. For me, Jimmy Moore should be telling the B&M stores to wake up and smell the roses (or Internet sales in this case) and compete with the Keeping Rooms of the world on the net in addition to their regional B&M customers. The approach he has taken of minimum pricing will only serve to reduce his business instead of building it as you have done.

Larry

[MJM_CA]

This is disappointing news as one of your long distance customer. I wish you the greatest luck, Duane, in building up your local business.

Does this policy apply to Taylor King? I'm in the market for some Taylor King upholstered product.

Best Regards,
Mike

[drcollie]

I would imagine it will (Taylor King) but there has been nothing come down the pike on it, yet - Taylor King does not have the distribution that the H&M product line does - but it does have the same ownership group.

I have too many loyal customers around the country that buy from my store because they like doing business with me to abandon them all. And they form an important part of my overall business sales as well. It would be folly for me to simply walk away from those relationships - so I have to get busy and do one of three things:

* Convince Hancock and Moore management to amend that policy in some form.
* Develop a private label brand that is equal in quality and not subject to any controls
* Find alternate suppliers with a less restrictive sales policy that build a high quality product.

All of the above will take some time to do and won't happen overnight, but there will be solutions come into play for my out-of-area customers!

[hglaber]

I don't suppose, as a partial/temporary measure, you could convince them to add an existing-customer grandfather clause allowing you to sell by electronic means to customers who have already done H&M business with you. The argument by the other dealers being they can't compete, you could argue that the competition is over and you won for these customers. If they can't buy H&M, they are more likely to buy another line from you than shop another store. I suppose they would have to offer that loophole to every distance dealer as well, and it would be nearly impossible to enforce without requesting some sort of proof be included with every order - pretty messy for a company still using faxes and (presumably) paper files to a large extent.

[drcollie]

That is an excellent idea and one I intend to pursue. Yesterday I got a call from a good customer in Milwaukee who has made several H&M buys from me and intends to buy more in upcoming years. I have been his only source for the product all along, and he tells me that otherwise he would have to drive to Chicago for a local Brick and Mortar dealer and he is not prepared to do go that distance in order to purchase Hancock & Moore. I have a number of customers in Idaho, Wyoming, North and South Dakota, Maine and upper parts of Michigan and Wisconsin - even Alaska, and I don't believe there are any H&M dealers within a days drive of them. They are reasonable and good people at H&M and I'm sure some of this may not have been fully thought out before implementation of this new policy - its more geared to keep folks from going into a mainstream store and shopping there, then going home and placing an order elsewhere based on a lower price. H&M wants to build and protect their brand, not penalize their existing customers - of that I am sure. Their intent is not to make folks pay more for an item when there is no dealer in their region.

The internet has changed the way we shop. I know that often when I buy things (especially for my cars or motorcycles) I do so at night, on the computer, based on that maker's web site and email communication. I don't ever lay eyes on the actual product until it arrives at my doorstep. Some of the items I get are quite costly, too. Going into a brick and mortar store - while the ideal solution - is not the only way to shop. Its a fast changing world in retail and everyone is still trying to find a way to do right by their customer and their dealer base as well.

[cuse69]

I remember doing business with FurnitureLand South 15 years ago when I lived in NC. They had a policy that allowed you
to purchase remotely ( phone/fax/ email ) at their discount pricing as long as you had visited and registered at their retail facility as least once. That might be another twist worth proposing to H&M to allow a subset of your remote customers continued favorable pricing for future business.

[shawnsisco]

Many good points have already been made as to the effect of this policy change not having the desired effect for H&M and instead resulting in less product sales and lost market share.

I will add these thoughts: Nothing whatsoever is preventing any store from having an effective online presence.....at this point they have benefit of a proven template to pattern from (Duane's), if they will work this side of their business, they will surely build up their local sales and their long distance sales. This complaining bunch seems to think that a link to H&M site answers the questions that their prospects may have-it does not, nor does it build a relationship with their customers; that is the job of the dealer.

Six months ago I found The Keeping room as a result of a google search- this is the first step in most buying decisions. I wanted high quality leather furniture, but I didn't know what brand that I wanted, I now own 6 pieces of H&M. I did go to the two nearest stocking dealers - Their lack of product knowledge,lack of follow up, lack of asking for my business, pricing games ($5980 T&C Addison Recliner reduced to $2400) cost them my business...I wasn't real eager to buy expensive furniture online.

Since the H&M line is so large, with so many options available, a prospective customer will likely have many questions; an online forum allows a correct answer to be made one time instead of tying up the sales staff answering the same questions over and over. Additionally, it is a great tool for the sales staff to build/refresh/add to their product knowledge.

As for difficulty with service issues from online out of state sales. H&M should require that the selling dealer state the online warranty terms to each prospective customer as a condition of carrying the line. H&M should re-double it's efforts to assure the condition of the piece when it leaves H&M's dock.

Finally as for pricing: With all else being equal, the higher you price items the less items you will sell.

[needstuff]

"..a minimum selling price for their product. You will see this in a number of consumer products and its legal to do so as per a 2007 Supreme Court Decision."

I was curious about this, it came up several years ago with a product that I follow.
It seems like one would have to be an antitrust lawyer to follow all this (or have an attention span greater than a snail, unlike me), but "legal to do so" may not be necessarily, automatically obvious. Apparently, a "rule of reason" standard is applicable now, rather than a blanket yea or nay. That's at the federal level. Moreover, it is not clear to me that all the states are on board with this.

"Although many likely will follow the Supreme Court’s lead, the 5-4 split decision included an extensive dissenting opinion that may embolden some states to reject the new federal rule.."
http://www.steptoe.com/news-298.html
and see the following:
http://www.crowell.com/NewsEvents/Al...hes-to-Pricing
http://www.foley.com/intelligence/detail.aspx?int=9055

With respect to the "rule of reason", this recent paper might shed some concern going forward. Assuming I, or anybody else, can understand it.
http://home.uchicago.edu/~davidsmith...n_and_MRPM.pdf

[drcollie]

Yes, this falls in the realm of Anti-Trust. I've been reading up on this along based on links supplied by Aaron (who is an Attorney), our Tech Admin here on the site and it appears that vertical pricing policies such as this don't stand up well in certain states like California, New York and Maryland, because it effectively denies the retail consumer choice in from whom they can buy from and in effect they must pay a higher price to go to their local store for the same goods. Typically a consumer makes a complaint to the State Attorney General's Office and that sets the wheels in motion at which point it seems most manufacturers are told to cease and desist. Laws vary considerably by state, it appears - the Federal law is very weak on the topic, but many states are not. However once a few states issue cease and desist orders, it appears most manufacturers give up trying to enforce it on a state by state basis and the policy collapses. Very interesting stuff on anti-trust, I'm learning a lot about it - though I do so out of curiosity and not in order to contest the policy.