Profit Prospects: Be Careful What You Wish

Every retailer is moaning, “If only manufacturers would ship what’s on backorder.” Well, be careful what you wish for. Furthermore, any complaint starting “if only” indicates a perceived lack of control over the situation.

Focus on These Control Points

• Use honey, not vinegar. We’ve known since kindergarten we get more in life if we’re pleasant and fun to be around. Yet some retailers consistently beat up on their vendors, creating less than pleasant encounters. Then retailers wonder why the vendors aren’t in more contact with them. Some retailers are getting “adequate” inventory by just being understanding of the vendors’ predicament. A little empathy goes a very long way.
• Most retailers saw good margins in 2020 and even better in 2021. It’s hard to say you didn’t get enough inventory if your margin dollars are higher this year. Sure, retailers didn’t get as much as they wanted, but they got enough to grow.
• The inventory shortages forced consumers to seek out new retail outlets. What retailer didn’t hear the phrase, “Wow, I didn’t know you existed. I’m so glad I found you.” Retailers can lose these new customers or cultivate them into long-term photography lovers.
• The biggest benefit of this shift is the lack of cash-sucking instant savings. Most manufacturers silently recognized the financial burden this was putting on retailers. As a result, they accelerated the speed of redemption, while dramatically reducing the number and value of rebates. This was likely the most significant margin boost for both retailers and manufacturers. Moreover, scarcity is a marketing tool. Let’s not lose that.

 Be Careful What You Wish: Some More Thoughts . . .

• Don’t wish away the good things that allocated product shipments brought to you. Prior to the pandemic there was a massive “fudging” of MAP policies. Most manufacturers have restored (or are still restoring) their credibility in the marketplace. Let’s applaud Canon for clamping down on counterfeit, sometimes-very-dangerous batteries.
• As we learn to live with a waning pandemic, there’s significant demand for real human-to-human interaction in classes, field trips, etc. These will continue to build in demand and, more important, drive the joy of photography for the people who started it as their hobby during Covid. Customers are also aware of the benefit of well-executed remote learning that allows retailers to reach new and old customers in a variety of ways.
• Product shortages have caused most manufacturers to drop their lower-priced cameras, focusing on using limited materials to build higher-margin product. It’s a short-term but necessary solution to a unique situation. Further, it does shut off a “gateway drug” access to photography for schools, which can hurt our industry. Many got into photography because of high school photo classes. Happily, many young people embrace the trend of buying used. The strong used business helps retailer margins and store traffic; however, it doesn’t help the schools that normally cannot effectively buy used.
• Current events indicate inflation is likely to be with us for the foreseeable future. This will allow many retailers as well as manufacturers to inch up their prices to allow for better employee benefits, more marketing, advertising and building of cash for expansion and new products. Everyone needs to ensure the prices they’re charging are at least enough to cover replacement costs, including erratic and growing shipping costs. Believing the supply chain chaos will end by Christmas is wishful thinking.

The Resurgence of Olympus

Furthermore, was it part of the pandemic shift or did we count Olympus out of the game too soon? The OM System 150–400 f/4.5 lens, selling for $7,500, took off out of the gate and has not looked back.

What’s more, the successful launch of the 21^st century OM-1 camera was embraced by photographers around the world. Be aware that Olympus (OM Digital Solutions) is again being talked about by customers, retailers and media.

What are you doing with your business to capitalize on these changes in the marketplace? Adjust today’s actions as well as future plans to take advantage of where we are, not where you wish we were.