When looking for a place that was willing to send me a replacement printer drum yesterday via AM delivery yesterday, I noticed that a large number of (apparently independent) online retailers seem to sell the same products, for the same price, and list the exact same number of them ‘in stock’.
It seems like they’re all just serving as frontmen for a big warehouse somewhere, where the orders are actually fulfilled.
What’s going on here? Why are there so many companies trying to sell the same physical merchandise, all of it presumably sitting on the same shelf somewhere?
I thought the point of online retailing was convenience, saving money by not maintaining a retail presence, and a much larger selection of available items.
And anyway, how is this economizing on inventories? There’s still a big warehouse somewhere with all this crap sitting in it. Except instead of the company that owns the warehouse selling to us directly, there are a bunch of little fly-by-night outfits acting as intermediaries. But their prices are all the same, their websites are all the same style, their shipping policies are all the same, their return policies are all the same…there’s nothing to differentiate them at all, really, so how come there are so many?
I would think it would be simpler (and more profitable) for whatever central warehouse they use to sell directly, that way these other people wouldn’t get a cut of the profits.
I’ll bet that the “central warehouse” figured that this was more profitable; they don’t need to advertise or maintain all of those websites, and they probably get more sales this way. Or perhaps the central warehouse also sells the same stuff directly, and lets others resell it for a small cut.
This is a fairly frequent type of web site, usually referred to as drop shippers (if the customer’s contract is with the company running the web site) or affiliates (if the customer really buys from the company that does the shipping).
I suspect the reason for this is that a lot of companies running web sites are, collectively, much more adept at verious angles of marketing than the large shipping company, which conversely is much more skilled at running its supply chain.
BTW one example of affiliate marketing are the Amazon links on the Straight Dope’s front page.
Often to give the appearance of consumer choice. At least that’s a part of it sometimes. It can also be that one company buys another but wants to keep up appearances for the company that was bought for whatever reason. (if that makes any sense.)
Other times it’s much simpler. Amazon runs Target’s website as well as Border’s. If you go to either, they not only look very much the same when checking out, but Amazon handles all the billing as well. (They may say they don’t. They do.)
Much of what is bought online from Target or Border’s is housed in Amazon’s warehouses. Efficiency allows them to sell cheaper than others by combining a lot of stock into Amazon’s warehouses (fulfillment centers) rather than spreading it out among 3 times the warehouses. Also, shipping is much cheaper since the carriers only pick up from those centers rather than 3 times the number of stops.
It could be that at one point in time, they were actually two different companies, but one of them bought the other, and so as to not to confuse/lose customers at the first site, they kept both of them up. Fry’s Electronics did that with Outpost.com, IIRC. Fry’s bought Outpost, but left the Outpost site up, adding only something about it being a “Fry’s Electronics Company” to the site.
Borders sold their online operation to Amazon, because it wasn’t performing up to expectations and Amazon keeps the Borders name there, with a “powered by Amazon” or somesuch on the site. Presumably, Border’s gets a kickback of some sort for either the use of the name or as a percentage of sales.
As someone that was cursed with a Borders gift card, you have to be careful not to choose items that are outside the Borders umbrella which is invisible to you. It took me forever to use the damn card because search borders=search amazon and the gift cards are ONLY good for borders purchases. There is no distinction on the products if they are a borders item or not. They can not be used for resellers of books either.
Just thought I’d elaborate on the Borders/Amazon thingy. It drove me nuts.
It’s at the same time extraordinarily easy and extraordinarily confusing.
When checking out, at the last page right before placing the order, under the title will tell you the seller. To use the Borders card it needs to say both “Sold by Amazon” as well as something along the lines of “Sold by Borders powered by Amazon”. If it just says “Sold by Amazon”, the card won’t work.
The easiest (?) way to use the card is to completely log off either site. The field below the search box will have “Not [insert your name here]? Click here.”
= hyperlink.
Then log back in on Borders’ site and continue shopping.
Like I said. It’s really easy. Unless you don’t know the trick to it. Then you’re just screwed.
Large-scale efficient warehousing is much more of a science and much harder than most people realize. I have done supply chain work and it is choc full of hurdles from statistics to union contracts to high finance. Joke: Someone that is not an expert in warehousing and supply chain concepts can make a small fortune in it (provided he starts with a very large fortune).
Likewise, web marketing isn’t that easy especially considering the competition out there. It is unlikely that experts in one type of business can just hire a few people and be good at the other side as well. It generally doesn’t work that well and many businesses have crashed by taking on a function they weren’t equipped for. Focused expertise is the real draw to this kind of outsourcing and warehousing and distribution are well suited for it.
So why would General Motors have different automotive divisions selling practically the exact same vehicle, other than a few cosmetic nuances and different badging? For example, the Australian division of GM, is planning to selling its Holden Commodore SS as the Pontiac G8 to the American market beginning in 2007/2008.
Brand loyalty, marketing and cost effectiveness, although I fail to see that building Pontiac G8s in Australia to sell in America is more cost effective than making them in America.
Especially if some of the merchandise is perishable.
Think of grocery stores. They have delicate, perishable produce, fresh meat & fish, frozen foods, and regular dry groceries, and non-food items. All with different storage requirements, shipping needs, and constantly varying demand.
The grocery industry is almost entirely organized as retail stores <== wholesalers <== manufacturers/growers. Because over the years, that’s been proven to be the most efficient structure. Even military PX’s and superstores (Super Target, etc.) mostly get their groceries from a grocery wholesaler. (Wal-Mart is the main exception to this, and it took them years to develop a delivery system that works for groceries. Even then, they offer only a limited range compared to regular grocery stores.)
There are less than a half dozen large grocery wholesalers who supply almost all the grocery stores in the USA. There used to be more, but several have gone bankrupt or been bought out in recent years. Some of them went under trying to do both retail grocery stores and wholesaling. Turns out to be quite different businesses, and very difficult for a single company to do both well. I’ve worked at 2 of the survivors (both headquartered in the Minnesota area), and there are endless amount of detail work involved.
Another reason to do it would be if your Company A had really bad customer ratings or something, so you create Company B which miraculously has a clean record.
In addition to the excellent answers given above there are also numerous online retailers/wholesalers that will happily link your into their inventory systems. Your page design, your domain name, and their product. There are more than a few operating in the pc biz that I stumbled across. IIRC ASI is one of them www.asipartner.com.
Sometimes just to give a different ‘face’ to the company, and try to appeal to customers emotionally.
An example: a local charity recently made a deal with a out-of-state mortgage finance company, where for each mortgage sold, a percentage of the fees would be donated to a charity selected from a list of about a half-dozen. Looking at their website, they had these charities listed: gay-lesbian groups, aids groups, homeless youth groups, etc. The webpage had rainbow graphics, comments about Pride & equality, etc. Obviously intended to appeal to gay-lesbian customers.
A friend mentioned to me that a black group he works with had recently made a similar arrangement. Looked at the webpage for that: it lists several black charities; has african flag (red, black, green) graphics, talks about civil rights, etc.
And looking some more, it turns out that both these sites are different-named subsidiaries of the same Philadelphia Mortgage Company. So they have different ‘marketing’ faces to appeal emotionally to different groups of customers. (Makes me wonder what you would see if you ignored the emotional appeals and just logically compared their fees with those of competitors.)
The SEO company that worked for them said they needed three sites to get more exposure. More keywords, more meta descriptions, more links, etc. Appeal to the folks who are searching for Gidgets & Widgets, appeal to the folks who want Gidgets & Foo, etc.
It doesn’t cost the client too much more to have 3 sites. He still has one warehouse, one card processing account, one product database, one phone number. But now he has 3x the Web presence.
At the bottom of each site there’s a tiny note that the site is owned by “Gidgets, Widgets & Foo Company.”
Oh, and also he does do “drop ship” stuff. Mixes it in with his own products. Same products as you’ll find on other gidget, widget and foo companies’ sites with the same names, descriptions and prices. Gives his product database and customer reach a bit of a boost - brings people to his site to see his own products and creates potential new customers, as well as expanding his keyword reachability and the like.