Chattanooga retailers grapple with online stores

Chattanooga retailers grapple with online stores

November 20th, 2011 by Carey O'Neil in Business Around the Region

Mike Stewart, right, helps customer Hunter Pruett with a shotgun selection at Feather & Fly on South Broad Street.

Photo by Tim Barber/Times Free Press.

Mike Stewart thought sales should be done the old-fashioned way.

Talk to the customers. Make them feel good about the product. Shake their hands and close the deals.

But not enough customers agreed with him.

His hunting and fishing shop, Feather & Fly, is shutting down after eight years on Broad Street, and the Internet is a major reason why.

As the economy took a nose dive, the hundreds of dollars it can cost to get into hunting or fishing became a tougher sell, he said. And those willing to invest in an expensive fishing rod valued price over service.

"We'll spend 45 minutes to an hour with someone showing them how to cast, and then they'll go online and buy it for $25 less," he said. "I decided, hey, I'm tired of fighting this battle. I'm not going to fight it any more."

By this time next month, all the remaining knives, watches, vests and lures Stewart didn't move during his going-out-of-business sale are leaving the storefront and headed to the one place Stewart figures they will sell -- eBay.

Brick-and-mortar retailers across the country struggle to find their place among a sea of Internet competitors.

Online sales are taking an increasingly large slice of consumer dollars. The average shopper plans to do 36 percent of his holiday shopping online this year, up from 32.7 percent in 2010, according to the National Retail Federation. With a potential third of shoppers online, websites are a clear threat to storefronts.

But making an online store takes more than a Web address and a few days making a website. The significant upfront and ongoing costs associated with the Web are significant stumbling blocks as small- to medium-size businesses look to expand online.

"We thought about it, but it would take a lot of work," said Ani Yacoubian, buyer for Yacoubian Tailors on Broad Street. "There's a huge expense to selling online."

For a site to compete, programmers and designers need to worry about creating pages for each individual product, laying out the site in a way that makes those products appealing and easy to find and linking each product to inventory numbers, all while fighting to push the site to the top of the search results pile.

"It's a doctoral degree that's required every day," joked Dawson Wheeler, owner of local outdoor equipment retailer Rock/Creek Outfitters. "These are the people who command a high salary."

Add to that the cost of secure payment systems, advertising, servers, storage and shipping, and some retailers write off online stores as more trouble than they're worth.

"Folks 40 and over, most of us see the computer and the Internet world as a necessary evil that we have to participate in to keep up," Stewart said.

Yacoubian estimates she loses 3 percent to 4 percent of those coming into the store to online retailers.

Terri Holley, owner of local shoe and clothing store Embellish, sees the same problem. She tries to compete by helping customers with fit and other personal touches online retailers can't offer.

"A lot of people who shop online, they don't care about that," she said.

So they'll try on clothes at Embellish, then shop them online for whatever savings they can find.

"That happens all the time," she said. "You can't do anything about that."

TAX ADVANTAGE

Retailers say they're at a disadvantage to their online competitors. Though buyers of Internet products are supposed to pay sales tax, few do. That gives online merchandise a nearly 10 percent price advantage over the same item sold in Tennessee stores.

"Government should not be creating winners and losers. Government should be treating everybody equally," said Mike Cohen with the Alliance for Main Street Fairness. "What we want is an even playing field for brick and mortar and online."

A bipartisan group of U.S. senators introduced a bill Wednesday requiring online retailers to collect sales taxes, something Cohen calls a huge step toward ending the online advantage.

"They've got a loophole and they're exploiting it," he said. "Either everybody should pay or nobody doing retail should pay."

THE NEED FOR WEB

Michael Lebovitz is the executive vice president for development at CBL, which owns malls across the country including Hamilton Place and Northgate. He said regardless of how sales tax laws shake out, an online presence is increasingly important.

"Successful retailers are going to refine their online strategy and help it increase their overall business and drive people to their stores," he said. "Both of them will lead to more business."

That strategy has led Rock/Creek to years of success. About half the company's sales come from its award-winning website, but making that website a success isn't easy. Rock/Creek hosts several climbs and races every year, drawing people from across the country and spreading its brand name. The company also markets itself as a source for outdoor activity information across the country and invests heavily in targeted advertising.

Still, Rock/Creek is a small operation. The company has three brick-and-mortar stores, all in the Chattanooga area, but the website is one of the top search results on Google for terms such as "rock climbing gear."

Mark McKnight, who has worked for Rock/Creek for seven years, said the company's smaller size helps it compete with the big-box stores. When large retailers try a new jacket, he said, they order it for several stores in men's and women's styles in a variety of sizes.

"It's a multimillion-dollar risk," McKnight said. "For us, it's just six jackets."

That makes carrying cutting-edge, unproven products less of a risk, and bumps Rock/Creek to the top of the search results when shoppers search for that jacket.

"Our customers are shopping online and doing research online, and we know that," McKnight said. "Being online gives us an advantage right there, because they can do their research with us and then come in and buy."

Online sales also help spread out risk. If Chattanooga has an unseasonably warm winter, that cutting-edge jacket won't sell here.

"You go nationwide, and actually worldwide when you're online, that risk is gone," he said. "I would not want to be in a position right now where I had a brick-and-mortar store and not an online store."