Competition

This is the fourth in our series based on Challenges of the
Future: The Rebirth of Small Independent Retail in America
, a 64 page white paper by Jack Stanyon, underwritten by the George H. Baum
Community Charitable Trust, the Illinois Retail Merchants Association, and the
National Retail Federation Foundation.

Competition.  We all have it.  Unless, of course, we’re selling something that no one wants.  Then it’s unlikely that we’ll have many competitors.  So, if we’re going to be successful, we must have competition. It’s a law of nature.

As we’ve discussed here before (It’s All About the Prices), competition today is everywhere.  It’s not just the store across town, it’s the big box stores, it’s retailers all over the world selling over the Internet. 

According to Stanyon, as the big stores become bigger, they become more efficient, decreasing their expenses per unit sold, making them even more competitive.  Because of their large size, the only way for them to gain significant market share is to take it from another large competitor.  As Wal*Mart, Target, and K-Mart fight it out, the independent retailer may get caught in the cross-fire.

So, what’s the answer?  I know you’ve heard it before, but you have to find a niche that you can serve in ways that the big boxes, and the on-line retailers can’t. 

Here’s Stanyon again:

"Because of the presence of the Internet and the increasing clout of large national chains, small independents must not compete on price.  To do so is a death wish.  It is not sustainable.  It is not winnable.  And it will likely lead to ruin."

Let me put it another way, You can’t win a price war with a mass merchant!  Ever!  Don’t try! It’s another law of nature.

That doesn’t mean you can’t be competitive.  There’s a difference.  Your customer expects your prices to be a little higher.  But they also expect to get something in return for those slightly higher prices.  They expect attention.  They expect to be pampered.  They expect a shopping "experience."

In another earlier post, "Say Goodbye to the Mass Market", we discussed the fact that today’s customer wants personalized service.  That’s where you come in.  Wal*Mart isn’t going to remember my name.  Home Depot isn’t going to write me a personal note when a new accessory comes in for the big-ticket item I bought last month.  Target isn’t going to have an after-hours party to show me their new fall line-up. 

The same things that create the "economies of scale" that reduce the big guy’s expenses are the things that keep them from delivering personalized service. 

Stanyon:  "The real strengths of successful small independent retail revolve around specialization, differentiation, and finding profitable, defendable, and sustainable niches."

Next time we’ll take a look at building long-term relationships, the real key to success in today’s retail environment.

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