The Importance of Independents/Independence Part II
When you're a retail buyer and you're looking to refill your shelves after they've emptied, you'd think you could just re-order the product for the same price you originally paid. It doesn't work that way, however, and it's easy to lose track of what got you to your most recent purchase price. If I paid $25 a bottle for a case of a certain whiskey and I run out, then of course I'm looking to re-order more for that price. Unfortunately, what usually happens is something like this: that price of $25 was part of a deal where I had to buy three other whiskies in conjunction. That combo has now expired and I can either buy a case on its own for $29.66 a bottle, or I can buy three hundred bottles and get that price of $25. I can't afford to buy three hundred bottles, and if I pay $29.66 then we have to start losing money, or I have to raise the retail price. The purchasing of spirits is a constant circus of fluctuating pricing, new specials, and expiring deals. Navigating this whirlwind can be frustrating because every deal becomes a worrysome purchase, where you say to yourself, "How much should I buy because I may never see that price again."
Yet, in the middle of this raging sea, there are independent distributors that provide some semblance of stability by working with retailers to come to a continuous agreement. I'll never hear the words, "Yeah, David, the price of Noah's Mill bourbon went up this month, sorry about that," or "That Murray McDavid mix-and-match deal is over for the year." The independents are not managing nearly as much booze as the big players and therefore are not in a constant state of inventory shock - the main cause of these quarterly sale opportunities. They've chosen their products carefully and are committed to representing them with the fiercest of loyalty, so there is too much at risk involved. They're dealing with relative unknowns that do not carry the prestige of say Patron, Maker's Mark, or Ketel One. If the price of Rothman's Creme de Violette goes up, are retailers still going to carry it and are customers willing to accept a price increase? In this case it's more difficult to say, hence why such drastic fluctuation rarely occurs. If you decide to support the smaller brands on the market, then they're going to work with you to help bring success to both sides, rather than dangle a carrot in front of you and try to goad you into buying things you didn't originally want.
Last night I went out to dinner with a group of industry folk, including some independent distributors, and we talked about big retailers like Costco and Trader Joe's who are stepping up the spirits game. With these stores there is so much buying power that special deals are made in their favor with quantities that only they could ever sell. They want the best price on everything and they want a better one than K&L gets so they can run a lower price. If I complain, the distributor might then decide to offer me the same price as long as I buy 2000 bottles, which leaves my choices at that point as: drop the product from our store, sell it knowing that our customers can go a block away to Costco and buy it for six dollars cheaper a bottle, or match their price and make nothing. Brands like Bombay Sapphire (with which this exact scenario happened) don't care too much if we drop their product because who is K&L to them? We're one retail store, so there's no room to negotiate or make a deal. The inherent problem with these gigantic deals is the constant lowering of a retail price for a product that hasn't gotten any cheaper. This changes the expectations of customers everywhere because once it goes down it can't go back up. They then walk into K&L and say, "$36.99 for Balvenie 12? That's expensive!" No it isn't! That's what it costs!
When I spoke of this incident at the dinner table last night, one of my buddies who distributes in SF said, "But you can't keep raising and lowering your prices! Your customers will be upset and they'll never know if they paid the best price or not. Why can't you just be happy charging a bit more and knowing that you give better customer service?" That's an interesting point and it's a philosophy that many stores are happy to embrace. I've lowered prices to match our competitors in my year as spirits buyer and it's made my stomach sick everytime I've done it because I know we've had it at a higher price for some time. In my experience, however, most people who are shopping for Lagavulin 16 are not looking for me to give them my advice or offer them any expertise. They're looking for the cheapest price on Lagavulin 16, which is why we have it.
To be continued...