About 10 years ago I used to make a great margin, the retailer made a great margin and the consumer got a great bargain. But a decade on that cycle has gone to pot and the only winner now is the consumer.
In an age where every Australian knows that if they don’t buy Product X today then it’ll be on Sale in three weeks’ time, the whole retail system has been reduced to the lowest common denominator: price. Consumers are squeezing the retailers, and the retailers are squeezing the wholesalers even harder. What I would like to know is where does the Australian wholesaler go from here?
My business is being pushed into a corner. Jewellers today are only doing huge volumes when they go on Sale because that’s now what it takes to entice people into their store. But rather than cut their own margins, I am finding it is the local wholesaler who is losing out.
I don’t want to portray the overseas wholesaler as the big bad wolf huffing and puffing at the door, but there’s something wrong with a system where the local retailer would prefer to pay for a plane ticket, overseas accommodation and time away from their business to get a cheaper deal overseas rather than support their local wholesaler. Where have the industry’s loyalties gone?
Retailers want to have their cake and eat it, too. They take their money overseas, but then they still want credit from the Australian supplier, they want overnight service from us, and they want to be able to order in small quantities from us. The retailer doesn’t want to buy from the local wholesalers but they want the local wholesalers to be loyal to them, and to service them when it suits.
The flexibility that the local wholesaler offers cannot be matched by overseas suppliers. I bend over backwards for my clients – if a retailer wants a 50-pointer diamond, they can pick it up that afternoon, and 95 per cent of the jewellery I have in my catalogue is available for delivery within 24 hours. When my business gets a call from a retailer saying they want 10 one-point diamonds, we sit there and we gauge 10 little diamonds for them. The overseas wholesaler would never do that. Retailers must understand they need to pay a premium for the extra service the local wholesaler offers – and it’s not a huge premium either.
Payment terms are a disaster in Australia too. Everybody I speak to has cash flow problems because the retailers can’t pay. But isn’t it funny when you go to the Hong Kong jewellery fair and see 60 to 100 Australian retailers there? Overseas, these retail buyers will have to purchase a bigger assortment and they will have to pay upfront, or much quicker, or when their goods arrive at customs they will have to pay the GST upfront. So on the one hand they can’t pay their local suppliers, while on the other they appear to have the cash to pay overseas wholesalers straight away.
What’s also funny about these overseas fairs is that Australian retailers think they are getting more of a bargain than they are. The truth is that half the booths at a fair like Hong Kong will be wholesalers. Retailers think they’re going straight to the manufacturers but that just isn’t the case – the little guys on those 2 ft x 2 ft stands are exactly like me.
It doesn’t help matters that the very wholesalers who are trampling all over local suppliers’ business are welcomed with open arms into our local trade fairs either – the presence of these overseas companies is even promoted. Perhaps the fairs should not allow these overseas wholesalers to exhibit, in an attempt to level the playing field?
It’s already evident that the vicious cycle has come full circle, because the consumer is also buying direct from overseas and bypassing their local retailer. Even overseas retailers like Macy’s have their own web stores now, whereby wholesalers do direct drop shipments for them so they can sell at lower prices than they can offer in-store – the Australian retailer is being cut out from all directions. What was once a loyal network of support between wholesaler, retailer and consumer has turned into ‘every man for himself’.
One thing’s for sure, though: if the Australian industry doesn’t pull together to support each other it won’t be long before there’s no industry left to protect – eventually both the retailers and suppliers are going to fall over, because there’ll be no margin left. And at that point the consumer who had it all will find themselves left with nothing.
Robin Sobel is managing director of Protea Diamonds