The Internet and knife sellers - I still don't get it.

DaveH

DaveH

Joined
Dec 2, 1999
Messages
12,249
Mike, congrats on your premier issue of "To The Point", well done.

I've read the article "The Internet - How it impacts our industry", but I still don't understand what the problem with internet knife sellers is. Maybe I'm naive but here's what I don't understand.:

Given:

- Free Enterprise Model ( more or less )
- Each knife seller is free to make
choices about how they operate.

What I don't understand is:

- Why would the manufacturer feel responsible
for a sellers increased competition?

- Why would a seller feel like they are entitled to some "protection" from this competition from the manufacturer?

Let's take an example, Let's say I have a knife store and one day someone opens a new knife store across the street. They have drive through service and offer a free burger with each purchase.

Is that "unfair"? Should I call the manufacturer of what I sell and ask them not to sell them anything?

How is the internet any different?

------------------------------------

You write,

"Several of these online dealers were selling at margins so low the storefronts would go out of business trying to match them. Manufacturers scrambled to respond to the new threat. "

What new threat? As you stated in a different area only 5% to 8% of the sales are online, was the threat that that number would increase dramatically?

From a manufacturers point of view, if my sellers are now all on the internet, as long as they are selling, what do I care?

-----------------------

Are manufacturers afraid lower prices would give a negative indication of the "quality" of their product? Do they consider their products as a "luxury" good, priced by name and reputation, rather than a "commodity" good, priced by the market?

Thanks for any assistance you can give,
DaveH
 
Dave,
You raise some excellent points, and I sure don't have the answers. The Internet (E-commerce) is the biggest Revolution ever.
The rules are still being written. It's not going to be the survival of the fittest, but of the most adaptable. Michael Dell of Dell Computers, puts it this way, "The Internet is a weapon, either you pick it up or your competitor will, but someone is going to die." Now, that's pretty hard, but life and business is hard. The prediction is that by 2006, half the workforce will be in E-commerce. There is no going back, this is where we are all going.

In business there are two ways to increase sales: sell more to existing clients, or get new clients. In the knife industry, manufacturers must do a better job of expanding the client base. Then they must sell their products, some may decide to just sell wholesale on a more selective basis. Others will figure that selling retail to the end user, at unbeatable prices, and cutting out the middle man, is the way to go. Bad news if you're the middle man. Who would benefit? The consumer, who is quickly becoming the deciding factor on how business will be conducted.
 
There is an academic theory called "The Cycle of Retailing". It basically says that a new form of retailing keeps emerging to supplant the ways that came before. As E.J. Korvettes (the first discounter for you young folks) put a dent in the old line department stores, and catalog shopping came and went, yadda, yadda. Best Buy and Circuit City sell CD's at near cost to get you to come in and maybe you will buy a TV. What has that done to the record stores that sell for a few $ more? It's killing them. The internet is the new boy on the block and if we knew what was going to replace this new surge, we could go long in the market and retire.
 
I work for a company that provides E-commerce solutions, for small to medium sized business'. I admit, I'm no expert. In fact there are no experts. It's growing too fast in too many directions. Even those that claim to know where it's going to be in the next, one to two years, are like the blind man that grabs an Elephant's tail, and thinks he's holding a Snake. It's going to be a bumpy ride.
 
Outstanding Dave!! The www is gonna hurt alot of walk in businesses because of the convenience and low overhead of online shopping. I hate going to the store!! Mostly because they very seldom have what I'm looking for or, they hire an army of old folks that hit you as soon as you walk in the door, asking what you need and can they help you find it. I do my own shopping, and more and more of it is online. It will be interesting to see what percentage of sales will be online in ten to fifteen years. Take care!! Michael

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"Always think of your fellow knife makers as partners in the search for the perfect blade, not as people trying to compete with you and your work!"
 
During my lunch today I went to just about the last store in San Francisco that sells Custom Knives to look around and ask if they might have what I consider a basic knife related item.

The response and attitude of the shop owner towards me will insure that I never darken his door again. He might not have recognized me as someone who has already spent hundreds of dollars in his store before, but I wasn't expecting white glove service, just simple common courtesy. When I asked if he carried a simple nylon sheath, he dismissed me out of hand. I am not exaggerating; he literally turned away from me and went up to another person who had just entered his establishment.

While I believe in supporting local business, they still must provide service and value for the money spent.


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James Segura
San Francisco, CA


 
Here are some boring statistics from 11/30/99

The reasons shoppers like cyber shopping.
24-hour shopping...72%
No crowds or Traffic...69.6%
Home Delivery...61.5%
Lower Prices...57.2%
Better Selection...39.7%
As good, or better, customer service online...89%

James, what would you have done if an Online Dealer, had treated you the same way?
 
The exact same thing. Stop giving them my business. My real point is that any business is only as good as the service rendered, on-line, storefront, catalog or barter.

------------------
James Segura
San Francisco, CA


 
There are valid reasons why a knife manufacturer would be concerned about the welfare of their current retail sales partners. The most obvious is current sales. Even if the net is the obvious future, you have to maintain cash flow until you get there. Contracturally and practically they have relationships that provide their current cash flow. They have some defacto responsibilities to their partners, legal, ethical, and practical. The practical side is that the retail outlets in the malls could all switch to competitors' products for the Christmas season. If you burn your partners you may suffer many lean years before you find new ones.

The internet is a tidal wave in the retail industry. While there will always be people with a need to handle and try products at the mall, the internet outlets offer a new flavor of competition that will influence the entire retail industry. The big box discount outlets have forced even the specialty shops to lower prices. The net will do the same to an even greater extent. All the manufacturers will have to get on board the net. Some may switch exclusively to the net. Some will need to cover storefront and net outlets. The pricing differential can't be too high. Small stores will go out of business while big chains will need to shave overhead.

As a side note, I think that some of our current low inflation in the face of prosperity and tight labor markets is due to internet effects on the market. The internet is labor efficient and moves goods with lower labor costs than stores. Also the price competition from net outlets is helping to hold down retail prices. Some of this is direct price competition and some of this is a matter of attitude. The net conditions people to expect bargains.

The net allows people to find small and remote sources of products, or conversely small producers to find small or remote customer bases. The net can improve the utilization of tools and talents around the world. A guy with a bulldozer sitting idle in Texas can connect with a road contractor in Colorado. We can get more productivity almost for free. The knife industry will adjust, we all will.
 
i read most of the above and have a comment or two...first i have a website...i believe in the internet...that its going to grow and its where i want to be..but on the other hand, to buy from someone you dont know..over the net..with your credit card, is a risk...admittedly in many cases a small one...but still a risk....the other point is that somewhere you need to have personal contact with a product before you spend money on it...at the store...you can handle it, open and close it, etc. this cannot be done on the net...and no matter how good something looks in a picture....that is not the item....just a comment...sincerely

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http://www.mayoknives.com


 
Dave,
Your basic question seems to be: why should manufacturers care about storefront dealers being driven out of the market by online dealers...

This forum we're all participating in necessarily self-selects for people at the relatively small intersection of two groups; we're all basically: 1) computer savvy/computer equipped, and 2) fascinated by cutlery. Online knife buying suits this group pretty well.

But by a very crude yardstick (Forum membership vs. US population, and yeah, I'm totally glossing over international sales/readership), this group accounts for only roughly four thousand out of three hundred million potential customers.

The knife manufacturers need the retail storefronts to draw in the casual customers (e.g. the person wandering the mall thinking "hmm, should I buy so-and-so a tie or a Swiss Army Knife for Xmas?"), and to draw in new potential future knifeaholics. The Internet offers a great way to sell knives to those who already know exactly what they want, but it also takes business away from the retail storefronts. If the retail storefronts close, the manufacturers lose access to a whole lot of potential customers. At least until such time as the Internet takes over the world
smile.gif


Storefront dealers offer two basic services that online dealers can't touch, which in turn help to reach all those other potential customers that don't fit into one or the other of the above mentioned groups:
  • You can physically visit their store (the most popular mode of commerce over the last few millenia), no computer necessary, and,
  • Once there, you can pick up and examine their stock. And if a picture is worth a thousand words, then actually holding the knife in your hand might well be worth a thousand pictures.
Several times, I've found a knife that I needed once I played with it in a knife store, that hadn't appealed to me when I'd seen it online. Conversely, a few times I've eagerly picked up a much-anticipated new model in a store only to find out that I didn't really care for it "up close". Both of these situations are much more cumbersome to deal with online.

As well, many a knifeaholic started out by wandering into the knife shop in the mall, or stopping to look when something in the store window caught their eye.

And it's much easier wander past the knife store in the mall and unknowingly be drawn in by the aroma of freshly baked knives than it is to accidentally type www.knifecenter.com (for example) into your browser.

I suppose one extreme approach would be to supplant physical knife stores with "knife showrooms", where they would have one of every possible knife available for viewing/handling, nothing was for sale, and you would pay a cover charge to get in. The idea being, if you wanted to handle knives before buying online, you'd just go down to the "showroom mall", pay a dollar (or 5? or 20? who knows what it'd cost to keep such a place in business?), go in, handle all the knives, ask various questions of the trained showroom representative, and then, decision made, go home and order the knife online.

Or maybe the showroom would have a computer available so you could place your order right then. Maybe they could collect some sort of commission from the online dealer for facilitating the sale. Maybe the online dealer could arrange to store some stock at the showroom so you could get the knife right away (because instant gratification is good), maybe... Oh wait, isn't this starting to sound an awful lot like a real store?

Well, I don't think the world is quite ready for such showrooms (and I really hate it when people treat physical knife shops as unwilling showrooms); maybe someday. In the meantime, having at least some brick-and-mortar stores around is a Good Thing(TM); it serves the interest of both the manufacturers and many consumers. So, reasonable ways need to be found to make sure that these stores can stay open, in the face of very price-oriented Internet-based dealers. What's reasonable? What will work? I dunno... but I'll be watching with interest...

Anyways, sorry to ramble; man, this cough syrup is good stuff
smile.gif


------------------
Carl /\/\/\ AKTI #A000921 /\/\/\ San Diego, California

Think this through with me ... Let me know your mind
Wo-oah, what I want to know ... is are you kind?
-- Hunter/Garcia, "Uncle John's Band"
 
Jeff Clark - [ relationships and defacto responsibilities ]

I'll have to defer to you on this point, because I don't have any practical experience in this area.

tom mayo- [risk of buying online with credit card]

There are at least a couple of systems that would provide for anon and verified payments. They don't seem to be being adopted very quickly.

Carl Jacobson - [ charging admission ]

I would support this. "Hi, I'm an internet shopper, can I give you $5 to look around and buy elsewhere?" Unfortunately it would have to be probably more than $5.

[Store front selling knives to Joe Shmoe]

It's been my experience that this is not the case. I have been to only ONE store in Baltimore, that had Spyderco, Benchmade, Boye, etc. That was exposed to the general public.

Excluding online, All other venues I've bought knives at have been gun shop, or gun/knife shows. All those are selective in the audience they attract. Do non knife people ever by Spyderco's or Benchmades?

DaveH
 
Another boring statistic.
Of all the knives I've bought over the last 18 months, that I've handled before purchasing...10%
Knives returned...zero

I live in NYC, I don't have a Knife Store, that I regularly visit to handle knives, except for Paragon Sporting Goods,(once or twice a year) but I've never bought a knife from them. The Internet is perfect for me, BladeForums just makes my decisions easier.

This thread a year from now, is going to appear very dated and out of touch.

I think the number of new people that go online everyday is like 65,000. There is nothing new about purchasing sight unseen. Someone just a couple of weeks ago bought a $200,000 Diamond online. You can purchase a Lear Jet online. What are we talking about? Knives, there's a bunch of well respected dealers, if you buy from them and your not happy, send it back. No problem.

"The Times they are a changing..."
 
The easiest thing to "buy" on the Internet without seeing it is a commodity- a product that doesn't change from source to source. I wonder how the internet will affect the custom makers whose products are not as reviewed in BladeForums or in the knife press. My "guess" is that the real custom makers will continue to market through specialty shows but that due to their exposure at these shows, will sell additional units over the 'Net if they set up the mechanism for it.
 
I'd been buying knives retail (as we all were) for a long time before the internet poked into my life. I'd bought a few handmade/custom knives at knife shows or thru the mail due to a magazine ad (Randall), but the status of my collection was still very limited.
Whoosh. Internet access and the forums at least tripled my buying habits; in one year I bought more than I had in the pevious 10.
Why ? Tons of options; the local stores have a decent selection but still pretty limited knowledge base re: employees. The only local shop in my area that I buy from is a (surprise), fellow forumite(Dennis Wright) who knows what he's talking about!
The internet will eventually affect the less informed knife buyer too, as people like you and I tell them where we got our latest toy.
I think the % of knife sales will tilt towards this (net) venue more and more in the very near future.
Whew, that's gotta be one of my longer posts!

------------------
A dedicated ELU
Buck Collectors Club Member
Knifeknut(just ask my wife)




[This message has been edited by Brian Lavin (edited 05 December 1999).]
 
Here are some thoughts for Carl.

While it's true that the internet saavy knife knuts (who are primarily male)tend to gravitate toward internet knife dealers let me share a few facts with you.

In October, 83% of our customers (judging from the name) were male. In November 68% were female. For the first 3 days of December our secure server took orders from customers that were 74% female.

We have sold more kitchen cutlery in the past month than in all the prior months combined from the opening of our site in February of 1999.

The biggest selling knife in units last month was the Victorinox Cybertool, 60% of which were purchased by females (possibly as gifts for males.) The biggest selling knife in dollars was the Kyocera KC-130 ceramic chef's knife which was purchased by customers 94% of which were female (possibly gifts for females.) You probably thought it was a knife from Spyderco or Benchmade or Microtech or Emerson, perhaps? Nope.

It's possible, I suppose, that it's Christmas time and women are the predominant gift shoppers. Nevertheless, many of them, no lots of them, are shopping on the internet. In fact we're literally buried in orders from females at the moment. I think it's a safe bet that the internet saavy knife knuts are predominantly male, not female. The internet, apparently, is appealing to everyone more and more as a source for shopping.

It's a genuine revolution. It really is changing our lives and shopping habits, everybody's shopping habits eventually. Some of the manufacturers are fighting it tooth and nail. I think they are hurting themselves but, of course, they have a right to hurt themselves if they choose.

Whoever suggested investing in brown trucks above is absolutely correct. Luckily, UPS has gone public and you can now buy their stock on the NYSE. I bought some. They will be serious winners from the e-commerce revolution. The internet may save the postal service thanks to priority mail. Take care.

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Fred
Knife Outlet
http://www.knifeoutlet.com


 
It may sound odd, but without the internet I wouldn't even be buying knives. The retailers in my area are a particularly sorry lot (in all fairness it might just be my not knowing where to look).

The local store stocks 80% junk and won't budge from MSRP. Going into the place is unpleasant - no real knife knowledge. Seems they got into the business by accident. Refused to special order a Boker Orion because "it was too much money" - can't make since out of that since I'd be paying in advance anyway.

OTOH, my internet dealer spent a lot of time advising me on sharpening, got to know my tastes and saved me from what would have been disappointing purchases and, in general, blew away my local retailer in the areas where the local is supposed to shine.

If the internet blew up tomorrow, I think I'd stop buying knives - just wouldn't be worth the hassle.

It's probably stretching a point, but it reminds me of the "computer dark ages" circa 1986 when Dell first started beating the service and support of local dealers. The corner stores were the first to be crushed, followed by the "big boys" that discounted the impact of the internet.

They who forget history will be condemned to repeat it.

Just my .02.
 
I really hope I neither repeat any content from up the thread unintentionally nor abuse the principles of economics.

Producers act in their best interests. Allowing their products to be sold online can either increase units sold to dealers or not. The accessibility/accidental exposure of the storefront mentioned above gives brick-and-mortar significant value.

Essentially (possibly a gross simplification, ignoring the ability to buy more knives if they each cost less
smile.gif
) the producer must choose between those who will buy, but cannot physically/locally and those who buy locally, but incidentally. I think we can assume that most would buy knives, whether online or locally.

The main point against going online (in terms of sale volume) is the (forever-mentioned) screwing-over of the LKS (local knife store). I won't go into that because I don't know enough to make any significantly new statements. There do exist other reasons, including brand-name concerns. Oakley (sunglasses) has gone through great troubles to ensure that its products have a constant value, including blacklisting discounters (for a long, long time now) and controlling the single online source (the O-Store). I don't know of any knife manufacturers with a vested interest in locking their prices, and especially not to this extent (I read a comment somewhere that estimated Oakley's name-value at 20% of SRP, given the products' performances).

On the showroom: Sony (consumer electronics) had a showroom fifteen years ago within a half-hour of my home, no admission, no sales, with the latest-and-greatest equipment. It tanked because of a lack of attendance. Seems that most people liked to see stuff that they could actually buy and accordingly went to department stores and the like. I would guess that even the most perfect knife-nut's paradise would die a similar death due the the indifference of the general public.

Since many production knives are now available via online dealers, one must be willing to spend extra money to support their LKS. My approach (I believe it was mentioned before on the forums, perhaps multiple times) to this is to buy a knife from the shop, but to handle and examine more, saving the others to buy online. Thus I save money compared to retail, and what I forgo pays for the service.
 
Well I have yet to chime in and I will only offer what will be proven to be fact before to long.

The Internet is the next wave of marketing. The manufacturers who do not recognize this fact will be lost. No dealer has turned into the Michael Dell of knives as yet. When that occurs you can bet your ass the manufactuers will take notice. The BS policies which are put into place to handle this so called "crisis" will not work.

Why am I so sure?

Simple, it has yet to work in any other industry so why should it work here? The fact is it will not work. There are to many manufacturers who sell through distribtution. Of course the manufacturers can go dealer direct but they will only be slicing their own throat in the long run.

Example: Lets say that Spyderco goes 100% dealer direct. They make their dealers sell the C36 Military at or near the full MSRP of $149.95.

If all other manufacturers do not follow Spyderco then I will bet money that the Benchmade AFCK sales, which have a similar MSRP will go through the roof and sales of other similar products will as well.

Spyderco, at that point would price themselves right out of the industry.

Don't believe me?

Any dealers want to release their sales figures on Microtech since they started policing their pricing policies?

I would bet good money that overall Microtech sales have dropped like a rock.

I would also bet that CRK&T product sales have gone through the roof for the same time frame.

Now the facts will speak for themselves but the average income level of the average net surfer has dropped over the last year by nearly $20,000 per household income.

Why?

Because computers are cheaper and online access is cheaper. This partly explains why about a year ago the average knife sale on the net was $78 while today it is $47.

Companies like Smith & Wesson, CRK&T, Gigand, Leatherman and even United Cutlery are accounting for higher percentages of sales now. Last year it was Benchmade, Spyderco and Microtech. Those brands will still sell quite well because they are easier to find on the net than at local stores. But if those manufacturers keep making it harder to sell those brands then you will see those brands harder to find on the net and the higher prices may be harder to swallow.



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Best Regards,
Mike Turber
BladeForums Site Owner and Administrator
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