Suppliers vs online retail: how online businesses are being held back

It’s one of the biggest challenges for online retailers, and they’re getting fed up.

Suppliers are attempting to curb the growth of online retailers by refusing to supply them with product, and by attempting to manipulate prices.  

Several retailers have revealed to SmartCompany not only have they been refused business, but they are pressured to amend prices after a business relationship has been established.

Some have been told to stop selling goods online altogether.

Australian Competition and Consumer Commission chairman Rod Sims says it’s an ongoing issue, and the watchdog is investigating cases right now.

“We do have investigations underway. We’re looking at online businesses that are being held back through a variety of means, not just prince maintenance but also refusal to supply.”

Last year, the ACCC took on several suppliers for breaking the rules, including a supplier of aquatic parts, AquaDepot. The company was forced to send a letter to retailers informing them they can set prices at whatever level they choose.

Wai Hong Fong, chief executive of online retailing group OzHut, says several suppliers have put the hard word on his business.

“They will ask if you sell online, and then if you do, they will say “we don’t sell to online, we can’t open an account.”

“When we started, most of the sellers didn’t want to give us anything. We qualified for both categories – online and a start-up – so it was incredibly difficult.”

Kitchenware retailer Everten Online, IT retailer the MegaBuy Group and other start-ups have all complained about not being given a chance.

But this reluctance to sell to online retailers comes at the same time when suppliers are feeling the pinch, with both JB Hi-Fi and Harvey Norman setting up direct-import models to cut costs and to avoid the goods and services tax.

Sims says retailers are simply trying to keep pace with market change.

“Increasingly, there are fewer reasons to go to a physical store if you can get it delivered after purchasing online.”

“Online selling is more advanced in some sectors than others, but there are definitely more sectors where you can buy – and supply – in quite non-traditional methods.”

SmartCompany contacted several suppliers of online retailers, but none were available to comment.

Who’s getting held back?

The number of online retailers that have admitted to being obstructed by suppliers is surprisingly high. A report by eBay last year showed that 78% of businesses surveyed had experienced issues with suppliers who tried to prevent the sale of products online.

Online businesses have described a number of instances where suppliers have terminated accounts, or even pressured them to stop selling goods at certain prices.

This is unlawful under competition law.

“In the early days, we were selling telescopes on eBay, and we were told that we need to take them off eBay or they would stop selling it to us,” Fong told SmartCompany.

“They never put it down on paper, and some don’t say your account is cancelled. It’s just that every time you call and ask for stock, there is no stock.”

Hal Pritchard, who heads up kitchenware retailer Everten Online, says many suppliers simply don’t want to deal with him.

“We have suppliers who are really good and work with us, and others just don’t want to know about it. It can be incredibly frustrating.”

“There are definitely suppliers who will do everything they possibly can to stop online retailers.”

MegaBuy co-founder Nick Shelomanov says his company has come across several situations where suppliers have denied access.

“They’re just afraid. We have to do all other kinds of magic to get access to their product range.”

“Sometimes they try to control what prices we sell at – not necessarily the big suppliers, because they’re too big, but smaller importers will try and say in no uncertain terms that unless we sell at a certain price they will increase our costs.”

Shelomanov says suppliers may even bump the company into a new price bracket without even telling them. “Sometimes we have a friend in the industry and we compare price changes and we can obviously see what’s going on.”

But it isn’t just larger companies – start-ups are also having trouble. Kirsty Chapman-Smith of Discount Party Supplies says she has encountered hesitancy on the part of suppliers.

“In regards to my direct experience with suppliers, I have had suppliers refuse to deal with us or fulfil orders once they found out that they were supplying an online seller – but I haven’t had suppliers ask me to remove goods for sale from our online stores.”

At the very least, suppliers new to online are hesitant.

Appliances Online co-creator John Winning said that when relaunching the new BigBrownBox site, the company had to deal with new suppliers, and some were timid. 

“At first they were hesitant to deal with an online-only retailer, but we took them through our entire process and customer experience from start to finish.”

“Once they were able to see the effort that goes into our website right through to delivery to the customer, they were able to see the benefits that online retail can have for both their businesses and the customers’ shopping experience.”