Why Can’t Small Retail Get It Right?ByRaymond D. Matkowsky
Across the United States and Europe small local retail businesses feel threatened by big box establishments or online outfits. A small business can compete against these giants.
There are only two main businesses to worry about, Wal-Mart® and Amazon®. Costco® is a third, but they do not have locations everywhere. If you have a Costco in your area, you will also have to worry about them. Amazon® and Wal-Mart® have effectively killed off much of the other competition. Wal-Mart® wants to become Amazon® and Amazon® wants to become Wal-Mart®. Amazon® is strong in online sales but does not have many brick and mortar locations. Wal-Mart® has many physical locations but is very poor in online sales. As a small business, you should just let these two giants beat each other up. You’re probably too small for either of them to be concerned about you. They can’t afford to take their eyes off of each other, so this is part of your strength.
Price Alone
In spite of the common wisdom, people do not buy on price alone. Later, I will relate to you a true story that illustrates this point. But, first let me say that you will have to level the playing field as much as possible. Both Wal-Mart® and Amazon® operate on approximately 10% markup. You almost certainly will have to lower your mark up and find some way to make up for it. Take a very hard look at grocery stores. Most of them operate on a 4% markup and they are quite profitable. It is well known that a small business cannot demand the same discounts from vendors as the big box stores do. Each small business is different. So each will have to find its own way to keep markup low. Keep in mind that markup does not have to be reduced down to the competition’s if you offer some compensating benefit. Look for opportunities. You can find an opportunity all the time. Find it and use it. Advertise it. People will not realize the benefit exists unless you tell them.
Personal Service
I believe the best benefit that can be offered is personal service. Let me give you a story that spans three generations. In addition let me give you a personal story that demonstrates that a big box outfit does not always have the best deal.
My wife’s Grandmother lived through the Depression of 1930s and my wife’s mother was a child during the depression. It is well documented that people who lived during the depression were very money conscious. In spite of that fact, my wife’s Grandmother would go to a small business to have her clothes made. When the business moved a dozen miles away, she followed it. For other needs, she patronized another local business even though a new mall was in reach. She got what she wanted – personalized service. She was known by her first name at both establishments. My wife’s mother also patronized these local businesses and at times the mall.
When my wife needed nursing uniforms and supplies she went to these same local businesses. They knew her name.
During a storm this past year, I had a gazebo in my backyard damaged. I needed a full sheet of plywood to replace part of the flooring. I went to a big box hardware store and bought the plywood. I asked that it be cut up so that it would fit in my car. I was told that they would make two straight cuts for free, but they would charge for the third and fourth cut. The full 4 ft. X 8 ft. (1.22 m X 2.44 m) sheet was cheaper than at the lumber yard, but with the added cuts it wasn’t. If I had gone to the lumber yard in the first place, I would pay more for the sheet but they would have made as many cuts as I needed plus deliver the goods to my home. There was a clear advantage in using this small business.
Why?
So, why can’t small retail business get it right? For two reasons! Either they say that they can’t compete and don’t try or they try to compete on price alone. Either way it is a losing scenario. Find your strength, find something that a big box or online service cannot do and compete on that!
If you have any further suggestions, do not keep it to yourself. Help your fellow readers!
If you have any questions, comments or suggestions drop me a line at rdm@datastats.com.
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