This message hit me hard as I start preparing for the busy holiday season and start to make my lists and check them twice for my girls, husband and family.
Because I am definitely a bargain shopper. I don't want to overpay for anything. And in this internet age, I don't have to. I can always find a better price. A cheaper price. A cheaper version. I have friends who direct sell everything from cleaning products to wine, lip gloss to children's books. This time of year, everyone is offering a discount. To get you in the door. To give you a taste. And to hope that it will get you to spend enough money that the discount was worth it, in the end.
And it's got me thinking about this changing retail climate, this internet age. How we shop, how we spend. How badly I want to support my friends and support local.
And yet, how I, like most people, have to pay attention to the bottom line. Because no matter how savvy of a shopper I am, the money is finite. The Christmas fund will dry up. So the questions becomes- what's more important? To support my friends and local businesses even if that means paying more? Or giving in to the Amazons of the world, knowing it's hurting the "little guy" but that it's helping me put more presents under the tree?
I've been pricing out trips to Disney for Spring Break with my Disney Girl (should out to Lisa
Rebstock, Travel Agent Extraordinaire) and am trying to find the best deals. Through some casual internet research, I came to discover that, early each calendar year, Disney offers free dining. FREE dining! That's amazing! I will be traveling with my family of five plus my mother in law- dining, per my previously priced out plan, was going to cost me about $1900! So FREE dining if I move my dates around a bit? Yes please!
So I had Lisa change my dates and recalculate my trip. Though I'm not surprised (but definitely disappointed), Disney's free dining ploy reconfirmed what I already knew: Nothing in life is free.
Free dining was actually going to cost me MORE than if I stuck with my original dates, which were not free-dining eligible. Basically, dining isn't free. Free dining, at the same hotels as my original trip, was about $500 more than paying for the original package and adding on dining. Dining is never free. And how could it be? If I walk into a restaurant with my party of six people and enjoy a meal, that food had to be purchased from the supplier, prepared by a line cook, sold to me by a cashier and so on. Not one of those elements is free. Somebody paid for it, even if Disney told me it was free. The truth is, I paid for it. Disney just sold it to me it a way that made it seem as though I didn't.
And so it goes in retail. Y'all- NOTHING is free. It's all about the marketing.
I tried my hand at direct selling a few years back with a company no longer in business. I wanted so badly to be good at it. I believed in my product, I asked friends and family to buy it. It was expensive. But it was good stuff.
I had a friend who consistently wanted to try the product but always resisted. She would tell me she wanted to buy the shampoo and then asked me what discount I would offer. Discount? How could I offer her a discount? Did she realize how little I was making selling her one bottle of shampoo to begin with? Literally, I was making maybe $3. But she complained. "Shipping is so expensive." Fair. It was. $4.95 to ship one bottle. And the shampoo was $12.95. "Amazon would ship it to me for free," she would tell me. Also fair- Amazon would ship it to you for free.
But not because shipping itself is free. Y'all- shipping is NEVER free. Someone pays for shipping. Always. UPS, FedEx, USPS- they do not ship your packages for free. It costs them money to operate their planes and trucks and pay their workers. Shipping is not free!
For starters, if you are an Amazon Prime member (and you aren't a student), you've paid for that membership! So you've prepaid your shipping. At some point, if you order enough, you've paid pennies per actual shipment. But you have paid for shipping! If you aren't a Prime member, you have to purchase a certain amount of goods- at least $35 worth, generally- in order for shipping to be free. But, again, shipping isn't free! Amazon just feels that, after $35, they've made enough money off of your purchase that they can "gift" you free shipping to seal the deal.
Now imagine a smaller company, who doesn't do nearly the amount of business that Amazon does. Imagine that this small company offers you free shipping. It isn't free! If you spend $50 on this company's products, they have made around $25 profit on your purchase. Maybe this is enough that this company feels "Hey, I'll eat $6 in shipping because I made $25." Your free shipping is eating into the profits. But maybe you, like me, are trained to look for deals. You won't online shop if you have to pay for shipping. But then you are consistently undercutting the company's profits, whether you mean to or not.
Back to the selling. Remember that shampoo? Yes, Amazon could have "gifted" my friend free shipping, thereby making her shampoo only $12.95. Maybe she would have purchased. Maybe she even would have thrown a few more things in her cart while she was already placing an order. But by asking me, a stay-at-home-mom trying to make money for my family, to discount her product, she was simply cutting into any money I may have been making. I did pay her shipping, in the end, to get the shampoo in her hand. She loved the shampoo, but never purchased again from me. "Too pricey," she said. Quite literally, it COST me $2 to get her to try a product. I didn't last long direct selling...
I've spent years in retail, prior to my mommy days. My last "real" job before I stayed home was with a high-end denim label, working as their Retail Coordinator. I've seen it all and heard it all. And in this changing retail climate- yes, Amazon is truly taking over the retail world- before we all complain that stores are closing and favorite brands are filing chapter 11 and small businesses can't survive- let's look at how our behaviors as consumers affect this.
Let's call the brand I used to work for Brand X. Brand X produced seriously expensive, gorgeous jeans. The fabric was imported from overseas, but the jeans are made in the US, in factories in LA. These jeans cost, on average, $50 to make. Fifty dollars, for the materials and the labor.
Now let's say that Schmooingdale's wants to sell these jeans. Brand X will sell these jeans to S for $100 per pair. That's to cover the $50 cost, plus $50 profit. Brand X then sets an Manufacturer's Suggested Retail Price (MSRP) for Schmooingdale's. $200. So, if S buys 10 pairs of Brand X jeans, S pays $1000. If S sells all 10 pairs at $200 each, S makes $2000 and nets $1000 profit. Not bad.
Not bad, but remember- S has stores all over the country that it operates. Each of those stores costs a lot of money. There is mall rent, there is the price of heating or air and electricity. There is the price of labor for the salesperson that sells you those jeans, the stock people who receive and sort the shipment that contains these jeans, and so on. So S may be "making" $100 on profit on each pair of jeans. But S is not keeping $100 per pair of jeans.
Let's backtrack, though. S has to sell five pairs of jeans at full price in order to break even, to not be in the red with these jeans. But it's a tough retail climate. S can't sell these jeans. S only sells two pairs at full price. So, S has made $400 on jeans. S still has eight pairs, and is still "in the red" for $600. So S offers a discount. Hey, shopper! I'll see you these jeans at 25% off. $150! $150 for these $200 jeans. Steal! So S sells four pairs at this discounted price. S makes $600 on these 4 pairs, so now S has sold 6 pairs and broken even. Not in the black yet, but no longer in the red.
But now this has affected how many jeans S wants to buy next time from Brand X. S says "Brand X, your jeans didn't sell very well for me. I had to give steep discounts on your jeans to get them out the door. I only sold two pairs at full price. I sold 4 pairs at 25% off and the remaining 4 pairs I sold at half off. I only made $400 selling your 10 pairs of jeans. I'm not impressed with that margin." Brand X then has to figure out how to make S want to keep selling it's jeans. Brand X then says "Okay, S. If you will keep selling my jeans, I will discount the price. Next month, if you will buy 10 pairs again, I will sell them to you for $90 each. Then you can still resell them for $200. Margin builder!" But now Brand X is taking a hit. Brand X either has to find a way to cut costs- buying cheaper materials, manufacturing overseas, layoffs- in order to continue to turn a profit on it's product. Everybody loses.
In order for you, the shopper, to get these "great deals" on consumer goods, companies have to take hits. How many Gymboree and Crazy 8 stores have shut down this year? How many stores will we see close down next year? And why? Because we, as end consumers, now have choices. I can stand at Target and price match to Amazon. Better yet, I can sit at home and research a product and, with a few clicks on the mouse, figure out who has the best price. Oftentimes, I can obtain this best price online. AND I can shop through cash back sites such as Ebates or Swagbucks and still use all my discount codes, ensuring I get the best price. Why would I walk into a Gymboree store?
And how often does Amazon, this big retail giant we all support, "support local?" When I went to my girls' school's silent auction this weekend, I didn't see any donations from Amazon. Not a single prize basket was sponsored by Amazon, or Target, or Walmart, or any of these other retail giants. But I did see lots of gift baskets from local direct sellers. From local mamas who run online boutiques or local photographers or other local businesses. Personal stock. Personal items. Purchased and paid for by these local businesses and kindly donated. To help the school. To support the kids.
Keep all this in mind this holiday season as you Amazon Prime all your presents straight to your doorstep. Keep in mind that we have an awesome local toy store in Mansfield called Sockmonkey Junction that carries incredible toys. No, they probably can't beat, or even price match, Amazon's price on toys. But I bet if you need a donation for your kid's school fundraiser you'll have a much easier time getting in touch with those owners than anyone high up at Amazon.
And if you need shampoo or oils or lip gloss or books or bags, consider buying from your friends. Consider paying full price, even if you could get it cheaper elsewhere. Even if it means one or two fewer gifts under the tree. Consider supporting your friends' businesses because they appreciate your business a lot more than Amazon does. Consider going up to Parks Mall and shopping in store rather than doing everything online. Support local. Support our community. Because the holidays are a time to be thankful- and it's awesome to be thankful for the incredible community we live in!
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