Readers Respond

Facebook’s billions

An item that compared the market capitalization of Facebook and The Home Depot led to several letters:

“The value of Facebook is staggering, given they don’t produce a single product except to waste employees’ attention to what they are being paid to do.

“I for one am not of the opinion that the stock will ever turn a dividend to any stockholder unless you own millions of free shares.

“No value just to have a way to pour good money into a service that offers no real value to the members or to advertisers. GM spent $10 million and might as well have spent it on something to attract a real customer.

“How do you say stop the madness when crazy advertisers are not even worried about ROI with this type of customer and no real way to get a payback.”

— David Wood

“Home Depot provides needed services to the homeowner, contractor and to certain OEM’s that are dependent on this channel. Facebook is a luxury that is used primarily as a social networking tool for amusement, and secondarily as a business tool. GM recently came out and indicated that they were pulling their advertising from Facebook because it was ineffective. Further, Facebook indicated in the last few days before their IPO that many of their users are now using mobile devices rather than PCs, which further degrades their advertising effectiveness.

“I am confused about how Facebook was initially valued for this IPO. It just does not make sense to me.”

— George McCullough

Global director sales/marketing

Quaker Chemical Corp.

“It’s a shame that something like this is allowed to happen. It is basically a scam to raise money for a company that is basically a fad that will eventually wear off when something better comes along, leaving a lot of people broke for gambling on their current success and future success.”

 — Jeff Verboncouer

Competing with the big boxes

“There are a number of ways to compete with big-box stores, but I believe the most important elements are to know your customers and their needs, have the absolute best customer service with well-trained and knowledgeable people, always be in stock on key (never out) SKUs (especially those unique to your market area), and price the most visible and recognizable SKUs as competitively as possible.”

— Wayne Reimer

On the partial spinoff of  Sears Canada

“Sears needs cash. That is a nice spin on a desperate move. Of all of the mega retailers out there, Sears’ head seems to be first in line for the guillotine. Mega retail is in for a major upheaval as the forces of the Internet are forcing major adaptation or death. In my view, Sears will not be up to the challenge.”

— James B. LaMuraglia

Trend Routing Technology

Showrooms and their challenges: The digital battleground

An article about the trend toward showrooming — browsing in stores and buying elsewhere online — led to this response from a follower of traditional showrooms.

“The showrooms are letting this happen to them. They can easily determine which lines they promote are also openly selling on the Internet with no IMAPP and have zero margin opportunity for the showroom distributor. They continue to sell these same products with the mind-set that they need to sell items the customers are walking in the door asking for, when they should realize the consumer is finding this on the Internet at reduced prices, driving the interest in viewing the product in the showroom.

“Showroom managers talk a lot about providing service after the sale, expert advice, etc., which is all good, but to most customers, the price is the determining factor (especially in a weak economy). Home Depot and Lowe’s would not exist if customer service and expert advice were the only criteria for making a sale.

“Showrooms need to support manufacturers that sell responsibly on the Internet and have an established plan to protect all forms of distribution. Most manufacturers have no clue and do not hire an agency or individual who can assist them in the process. Having a valid and enforcing an IMAPP is the beginning, but they also cannot approach the Internet distributors the same way they do the other channels of distribution. They are different and have their own set of needs.

“Showrooms also need to understand they are no longer the driving factor in developing product and brand awareness as they once were. Consider that for every person who walks into your showroom, there are probably close to 100 people who have looked at products in this category via the Internet the same day in your zip code alone. It doesn’t mean that you are not a viable source of product distribution (and likely still the best when it comes to knowledge and service after the sale). It just means you need to understand what the resources you offer and how they are best suited for in the market dynamics, which now includes a customer who has already seen the product in their living room, the drive over or on their lunch break at work.

“Choosing your vendors selectively (and not just because they are a major player in the market) will allow you to maintain a level of respectable profitability while presenting a competitive price against any other distributor in the market, Internet, big box or mega-wholesaler.

“Point being, if a customer is going to continue to purchase products from their phone in your showroom, you are not receiving any profit from the floor space anyway. Put a product line on display and promote one they can find on the Internet with a solid IMAPP or one they cannot find on the Internet at all. The consumer may decide they do not wish to purchase this less recognizable brand, but at least you saved your dignity by not having to watch them buy from someone else while standing in your showroom.”

— Matthew Gardner

(The author is president of AMP Enterprises, which specializes in consulting manufacturers and distributors on Internet distribution programs where sensitivities in distribution channels and pricing are concerns.)