Online Shoppers Are Rooting for the Little Guy
January 17, 2012 Leave a comment
Published: January 15, 2012 By STEPHANIE CLIFFORD and CLAIRE CAIN MILLER
Harold Pollack used to spend $1,000 a year on Amazon, but this fall started buying from small online retailers instead. The prices are higher, but Dr. Pollack says he now has a clear conscience.
“I don’t feel they behave in a way that I want to support with my consumer dollars,” Dr. Pollack, a professor in Chicago, said of the big Internet retailers.
Giant e-commerce companies like Amazon are acting increasingly like their big-box brethren as they extinguish small competitors with discounted prices, free shipping and easy-to-use apps. Big online retailers had a 19 percent jump in revenue over the holidays versus 2010, while at smaller online retailers growth was just 7 percent.
The little sites are fighting back with some tactics of their own, like preventing price comparisons or offering freebies that an anonymous large site can’t. And in a new twist, they are also exploiting the sympathies of shoppers like Dr. Pollack by encouraging customers to think of them as the digital version of a mom-and-pop shop facing off against Walmart: If you can’t shop close to home, at least shop small.
“Folks are exercising their desire to support local stores where local is not just in their town, but anywhere in the country,” said Michael Walden, a professor who studies regional economics at North Carolina State University. “A large number of Americans have a general suspicion of bigness in the economic world — they equate bigness with power, monopoly.”
Lacy Simons, owner of Hello Hello Books in Maine, a small store with an e-commerce site, says she is seeing customers “cement their determination to shop local” — which on the Internet, means shopping at the smaller vendors — even when the big sites offer lower prices.
“We know there’s only so much that we can do to compete against them, so you end up relying on what hopefully becomes an emotional or personal connection with the retailer online,” Ms. Simons said.
The battle between supersites and small online retailers became pitched this holiday season, as the big sites raked in the money. In November and December, the 25 biggest online retailers, including Amazon.com, Target.com and Walmart.com, received 70 percent of e-commerce dollars spent, an increase of three percentage points over last year, comScore said.
Amazon, the world’s biggest Internet retailer, has been the leader in aggressive promotions that small sites can’t afford to match — and has received the most criticism.
This holiday season, Amazon offered price cuts on almost all holiday gifts; it can do this in part because of its size and profits from other businesses, like cloud computing, analysts said. The company offered free overnight shipping on thousands of items, and advertised its price-checking app by giving shoppers 5 percent off items on Amazon that they scanned in a store.
Amazon says it is giving consumers what they want. But the price-check promotion drew special ire; Senator Olympia Snowe, Republican of Maine, called it “an attack on Main Street businesses.”
It is contributing to “a reputation as a bully,” said Sucharita Mulpuru, an e-commerce analyst at Forrester Research. Reflecting that, in a reaction similar to what occurs when Walmarts open in small towns, some consumers say they will not support supersites any longer. But the economics of that decision are not always sound, said Professor Walden of North Carolina State. If a small site is selling products from a national manufacturer, for example, to people scattered around the nation, it has little effect on local vitality, he said.
Dr. Pollack, the Chicago professor, says that even if he is not supporting Chicago retail with his online purchases, he is not supporting what he calls big business’s bullying ways.
Emily Powell, the chief executive of Powell’s Books in Portland, Ore., which has an e-commerce store, said she attracts some shoppers with similar attitudes. “People come because they want to support an independent and feel good about it,” she said, but especially in a recession, “you can only guilt people into coming to you for so long.”
That’s where the other strategies kick in.
Some stores respond by carrying exclusive items at their sites. Powell’s Books, for example, offers a subscription service through which it chooses a new book and includes an extra item like a related book or candy — personalized touches that it says big sites can’t match.
Other sites try to play hardball by refusing to carry what the big stores do, among other tactics.
“What I can’t compete with is one day, for whatever reason, Amazon will suddenly drop a price below wholesale cost,” said Ali Wing, the founder of the baby store Giggle. She has stopped carrying products, including a car seat and certain toys, when she can no longer compete. “I won’t take that brand damage and have you have a reason to think that Giggle is expensive.”
Lori Andre, owner of Lori’s Shoes, an online and physical store based in Chicago, is asking vendors to give the shoes that Lori’s carries different model names than it gives other stores, or to put a different label inside, so shoppers can’t compare prices with a Zappos. (That may not win over shoppers; Best Buy, when it created its own labels to prevent in-store price checks on electronics, drew criticism from consumers.)
Lesley Tweedie, the co-owner of Roscoe Village Bikes in Chicago, introduced an online marketplace for small retailers, Little Independent. “There’s been a response from people who value a different style of shopping,” she said.
Ms. Tweedie was so annoyed when she saw consumers using smartphone apps in her store that she began a “Buy It Where You Try It” campaign on Twitter and Facebook.
“I can’t tell you how often that happens in the store, where someone is asking my advice and then actually says out loud, ‘I wonder if I could find this on Amazon,’ ” she said. “I think that some people never really thought about the ethics.”
Amazon said it is helping small online businesses stay afloat by allowing them to sell on Amazon, through its Marketplace program, and take advantage of Amazon’s large customer base, technology and marketing. Sellers pay a percentage of revenue in return.
“For a lot of these small and medium businesses, this isn’t something they would be able to scale up and provide themselves,” said Peter Faricy, general manager of Amazon Seller Services. He added that third-party sellers’ items were included in promotions like Price Check.
Yet some small retailers with e-commerce sites say that no matter what consumers say, supersites’ prices are just unmatchable.
Mike Stewart opened Feather & Fly, a sporting-goods store in Chattanooga, Tenn., eight years ago. As online stores started to pull away his customers, Mr. Stewart began selling some products on the Web.
Online, he found, “there’s no way I could compete against a big-box type store that could have massive inventories or cut deals to get better rates,” he said.
“We did have good customer loyalty here,” said Mr. Stewart, as he boxed up the inventory left over after his going-out-of-business sale, “but the Internet is a killer.”
A version of this article appeared in print on January 16, 2012, on page B1 of the New York edition with the headline: Rooting for the Little Guy.