Almost a year after announcing sweeping changes to its distribution, The Kama Sutra Company reports that its goal of supporting retailers by stabilizing pricing is paying off.
“When we started this company in 1969, things were very different,” said Joe Bolstad, Kama Sutra’s founder and CEO. “Most of our distribution was in small independently owned stores and the Internet didn’t exist. In recent years, with more manufacturers and distributors competing, we realized that our items were showing up all over the place at heavily discounted prices.”
We are so happy with the relationship we have with our distributors. We really work as a tightly knit group and are much better able to offer support and gain share of mind with them.
With the uptick in the number of independent retail websites, and major companies such as Ebay and Amazon offering inexpensive “store front” options, it has never been easier for individuals to offer products for sale via the web. According to the company, while this sounds great in theory for manufacturers looking to increase sales, it also heats up the competitive market place and ultimately leads to increased discounting practices.
“The Internet isn’t a fair playing field,” Kama Sutra President Beverly Pollington Sirjani said.
“When you buy a product via the web, you don’t know if you are buying from a legitimate business or from someone sitting in their living room. For that reason, many manufacturers have started to see their carefully considered MSRPs eroded by virtual storefronts operating with little or no overhead. In response, distributors are pitted against each other to cut their margins and offer steeper discounts to their bricks and mortar customers. Meanwhile customers lose out as they become confused over the true value of items, and manufacturers start to cut back on the quality of their goods and advertising support to compensate for shrinking margins. All in all, everybody loses.”
Kama Sutra says it was facing this problem last year.
“We have always been proud of the fact that we manufacture our products in the U.S.,” Bolstad said. “Not only does it allow us to control our proprietary formulas, but we keep control of our raw ingredients and manufacturing processes this way. Added to that, we believe in supporting U.S.-based business to keep our economy strong, and ultimately support our place in the world. Recently, we were seeing more and more rogue pricing — in some cases offered to the public at below wholesale. We felt that we had two options — either turn a blind eye to all the heavy discounters and allow the marketplace to offer up whatever it liked, or protect our long-term customers who were sticking to our MSRPs.”
Kama Sutra says that rather than choose to lower the quality of goods and play the discount game, the company decided to minimize the number of distributors it worked with in order to better control its message.
Robert La Joie, senior director of sales was tasked with putting together a consortium of distributors who would be willing to work with Kama Sutra to help qualify legitimate customers. “We wanted to work with a group who would agree not to offer up large discounts on a regular basis, not to trans-ship our products to countries where we had exclusive agreements and not to undercut high street retailers making it impossible for them to compete. We also wanted to work with distributors who weren’t offering up similar private label brands in competition with ours while benefitting from all the advertising monies we spend on our brand.”
La Joie decided on a group of five distributors chosen for their long-time sales with the company, geographic proximity and standing in the industry. Kama Sutra’s distributors are Choice Supply, East Coast News, Eldorado, Honey’s Place and Nalpac.
“It was hard to part ways with some of our distributors as I had developed relationships,” La Joie said. “Ideally we would have loved to have made it work with a larger group, but we felt five was the optimum number to really be able to control our message and make sure everyone was in agreement with what we planned.”
The company says it was convinced that reducing the amount of distributors was the only way to protect “real” businesses that rely on the integrity of manufacturers to be able to compete fairly.
“The first few months were bumpy after the change,” La Joie said. “Not everybody understood what we were doing and there were a few unhappy customers. Unfortunately many rumors were circulated during that time and it was hard for us to justify why we had made the changes we did.” Internal changes also added fuel to the fire. “We needed a team who was on board with our bigger picture, not just chasing short term gains.
“Now we are committed to growing our business in a fair and ethical way,” La Joie said. “We want to make sure that we align ourselves with legitimate full-time retail operations, both physical and virtual. They need to have the same access to the best pricing so they aren’t competing with parttime ‘armchair’ resellers.”
Pollington Sirjani reports, “We started to see a real turn during our Valentine’s season. Usually we see a slowdown after Valentine’s, but this year our March and April sales exceeded all expectations. We literally were slammed with so many new orders it has been hard to keep up. Admittedly it’s a good problem to have, but it has meant that we’ve run out of a few items while we scramble to keep up.
“Our business is up by 20 percent since we made the change, and I think our retailers respect what we’ve done. As we look out to an ocean of other discounted brands, we’re glad that we have been able to stabilize things. The other benefit for the company has been its ability to work closely with the new smaller distribution group.”
La Joie adds, “We are so happy with the relationship we have with our distributors. We really work as a tightly knit group and are much better able to offer support and gain share of mind with them. It’s been so good for us all round and they benefit from knowing they have our loyalty.”
The 43-year-old company says it has big plans for the future.
“Our increased sales have meant that we are investing in a television campaign that you’ll see this summer,” Pollington Sirjani said. “We will also be introducing new display units and items at the AMNE show in July. Now we are confident to invest heavily in our brand knowing that our long term dedicated customers will see the benefits.
“2011 was a tough year with all the changes, but the long-term gains are beginning to show in 2012 and we’re happy to be able to offer the same high quality to our retailers without compromise.”