Guarding the Gates

This is the ninth 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.  Today we take a look at the trend of community activism.

This is the first time that I basically disagree with Stanyon’s position.  What he calls "community activism" is best described as local businesses banding together to stop the spread of retail development in order to protect the "personality" of the local area.  In the past, you saw it most often when Wal*Mart announced plans to move into a new community.  Local merchants would try all sorts of strategies to keep them out. 

Today, we’re seeing the same thing happening in major cities.  A recent example is the attempt by the City of Chicago to keep Wal*Mart and other big boxes out of town.  Although the ordinance, specifying that large retailers would be required to pay a "living wage" and provide certain benefits was passed by the city government, Mayor Daley vetoed it.  There have been similar fights in other cities. 

Where Stanyon and I disagree is his statement that "protectionism from increased competition has often proved unproductive.  First, consumers will find their way to where they want to shop–big box, specialty store, or national chain.  Secondly, trying to stop new development often becomes a major distraction for the small retailers when they should be spending time thinking about their own business and improving their downtown or neighborhood shopping areas."

While Stanyon’s premise seems sound, local governments are often taken in by the promise of more jobs and a better economy that the big box stores offer.  To get these perceived benefits, they open their wallets and provide outrageous incentives to the chains.  This gives the big stores an advantage that they don’t need and that taxpayers shouldn’t have to provide.

A good specialty store should have little trouble competing with a big box store on a level playing field.  Their presence may require the independent dealer to change strategy and work a little harder, but the inherent benefits of an agile, flexible, locally-owned retailer should outweigh the advantages of size that the big guys enjoy.

But, given millions of dollars in tax breaks, the chain will win every time. 

While Stanyon has a point that too much concentration on possible incoming competition might distract from running the business and improving the local community,  the two aren’t mutually exclusive.  In fact, preventing new competition from getting a sweetheart deal from the local politicians may be necessary in order for the independent to have a business to run.

As most of you prove every day, it’s possible to survive and thrive in the face of competition from the big boxes.  In fact, it’s been shown many times that having a chain store nearby can actually help the local businesses.  Given the choice between having a Wal*Mart in your town and having one in the next county, it’s generally better for the independent to have them in town.  Otherwise, shoppers may do all their shopping in the neighboring community, bypassing you altogether.

The arrival of a big box store doesn’t necessarily create jobs.  In fact, it may replace existing jobs with jobs that pay less, giving the area a net loss in income (and tax revenue).  Local stores that don’t meet the challenge go out of business, leaving boarded up store fronts that reduce tax revenues and actually add costs for the local government.  As members of the community, it’s up to all of us to see that our
tax dollars are spent in the most efficient way possible.  Ignoring our responsibility to our fellow citizens to devote 100% of our time to our own business may turn out to be rearranging the deck chairs on the Titanic.

Generation Y

This is the eighth 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.  Today we take a final look at Changing Demographics.

Stanyon’s third powerful demographic trend is Generation Y. Sons and daughters of the Baby Boom generation, Gen Ys are generally considered to have been born between 1985 and 2000, the last group born in the twentieth century.  They’ve grown up with the Internet and aren’t usually moved by traditional types of advertising.

While we boomers get our information from network television, they get theirs from one another, specifically over the Internet, in chat rooms and by instant messaging, and on social web sites like MySpace. 

A good source of information on the Gen Ys is an article from Business Week, cleverly called "Generation Y".  The article points out that this generation is more cynical than past generations and is more likely to be influenced by non-traditional types of marketing.  They’re more diverse making generalizations and mass marketing difficult.  Some big companies have tried and failed to reach this group including Pepsi, Nike, and Levi jeans. 

Mountain_dew
As the article points out, while Pepsi is struggling for market share with this group, one of their favorite drinks is Mountain Dew, a Pepsi product.  The reason?  Mountain Dew is high in cafeine, something which Pepsi doesn’t promote.  The success of the soft drink is totally from word of mouth.

Ys are more practical than previous generations and are already looking at their futures.  Many of them have their own credit cards.

As the oldest members of Generation Y are just entering their twenties, it will be a while before they start buying many durable goods for themselves, but many of them have an impact on family purchases, especially in single-parent households.  They are the future and now is the time to begin connecting with them.

Growing Ethnic Population

This is the seventh 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.  Today we look again at Changing Demographics.

Currently there are 43.5 million Hispanics in the United States, making them our largest minority.  Not nearly as large, but still important, are other groups including Asians and Eastern Europeans.  The ethic makeup of your community is an important consideration in your sales, marketing, and human resource decisions.

Obviously, if you have a large group of potential customers whose main (or only) language isn’t English, then you should have people on your staff who can communicate with them.  That’s a given.  But, other cultures have may have different habits and customs than we’re used to.  If we’re going to cultivate a long-term relationship with the entire local community, it’s important to be aware of these things and to act accordingly.

For example, different cultures celebrate different holidays.  Many Americans believe that Cinco de Mayo is Mexican Independence Day.  It’s not.  Cinco de Mayo marks the Mexican defeat of the French army in 1862 which had a major impact on our own Civil War.  Mexican Independence Day is actually this Saturday, September 16.  If you have customers of Mexican heritage, you should be marking this Saturday as a special day.

Learning the customs and culture of all of your customers will be greatly appreciated and will create new business opportunities.  These customers can be incredibly loyal if they feel that you’ve taken the time to understand and appreciate them.

Here’s a link to an article on the Small Business Administration’s web site that you might find interesting.

Our “Aging” Population

This is the sixth 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.  Today’s topic is Changing Demographics.

Approximately 21% of the United States population is 55 or older.  By the year 2030, that figure will have risen to 31%.  This "aging" of America is a huge opportunity.  Today’s more mature adults have more free time and more disposable income than any similar group in our history.  They (we) also have special needs.

For example, older eyes aren’t as efficient as they once were.  Type needs to be larger and lighting needs to be brighter, both in homes and in our businesses.  If you want to alienate 21% of your potential customers, make it difficult for them to read the signs and tags in your store.  Trust me, that will do it.  If there’s something your mature customer can’t see or read, do you think she’ll ask, admitting that the eyes aren’t what they used to be?  Or will she go elsewhere?  What do you think?

As much as we’d like to think otherwise, most of us aren’t as strong or as fast as we once were.  We desire products that are lighter in weight, easier to carry or push, easier to operate, just generally more user friendly.  Believe it or not, many potential customers in this age group are not computer users.  They may be intimidated by the latest high-tech gadget.  The KISS principle definitely applies here.  You may spend more time educating this customer, but that’s something your mass merchant competition isn’t doing.

It’s important to make your store customer friendly for every age group, but by catering to the needs of this group, you’ll build a loyal following.  For example, do you have chairs for your customers to sit in?  What about customer-accessible rest rooms?  How about free coffee or bottled water?  Some magazines for the spouse and toys for the grandkids aren’t a bad idea either.  Use your imagination and make your store a destination.

 

The good news is that many of the 55+ crowd is retiring early.  That means they have more time for leisure activities and more time to shop.  They’re also more likely to be value shoppers, willing to pay more for quality.  They aren’t big box shoppers. 

Give them what they want and need and they’re very loyal.  They’re likely to be involved in social activities that give them plenty of chances to spread positive (or negative) word of mouth.  Treat them right and watch your business grow.  Of course, the reverse is also true.

More disposable income and more time to spend it make this a group of customers that’s well worth your time and effort. 

A Tale of Two Retailers

This is the fifth 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.  Today’s topic is Competition.

Here’s a story of two retailers. I’ll call them A and B. What they sell really isn’t important to the
story except that they both sell roughly the same kind of merchandise. They are truly specialty stores in that
neither one sells anything that anyone really needs. If you were going to buy something in either
store, it would be because the item caught your eye, or because someone sold it to
you.

Dealer A and B are both located in a busy tourist area with
lots of specialty shops and restaurants. It’s the kind of place you might go spend a Saturday afternoon which is
exactly what my wife and I did this past weekend. The two stores are no more than a block
apart.

Store A was busy. There were at least four people working
there. There was music playing and the
atmosphere was very conducive to buying something, which I did. I’ve been in this particular store many times. It’s always busy and I don’t recall ever
leaving there empty-handed.

Store B was a different story. When we walked in, there were no customers in
the store. The only person working
there, who appeared to be the owner, was talking on the phone.  She was talking (quite loudly) to someone
about how bad business is. She blamed
gas prices, interest rates, the President, the stock market, chain stores, Al-Kaida,
the bird flu, global warming, you name it. Listening to her side of the conversation, and it was impossible not to
in the otherwise quiet store, you would think that we’re on the brink of
another Great Depression.

While we were there several other people came into the
store, looked around, and left. In that
entire time, she continued her doom and gloom conversation, never once acknowledging
any of her potential customers. When we
left she was again alone in the store, continuing her conversation.

I would be willing to bet that at some point she told her
phone friend that several people had just come into the store and left withoug buying
anything, proving her point that the economy is in a mess.

I could go on about what store A did
right and what store B did wrong, but you already know that. It all comes down to making your store an
inviting, customer friendly place to shop. Store A is far from perfect. In
all the times I’ve been there, no one has ever asked for my email address. No one has ever tried to up sell me or to
suggest additional merchandise. But, it’s
a pleasant place to shop. The people are
friendly. The atmosphere makes it hard
not to buy something. Store A is good
with the potential to be great.

I feel sorry for the owner of store B. Remember, neither of these stores sells
anything necessary. But, if store B were
selling bread and milk, most people would still stay away. The atmosphere wasn’t inviting. Anyone who overheard and believed what the
owner was saying would be just as likely to run home and bury their money in
the back yard as they would be to buy something.  For the owner to not even say "hello" as people entered the store is inexcusable.   Store B reminded me of the
auto parts store in an earlier post (Waiting for Things to Get Better).

When we consider our competition in the retail business, we’re
likely to think first about the big box stores. They’re the ones with the big ad budgets and the huge buying power.  We seem to see their ads every time we pick up
the newspaper or turn on the TV. It’s natural to think about them when sales
aren’t what we think they should be.

But, face it, there are a lot of consumers who just aren’t
our customers. They’re only concerned
with price and we’ll probably never have a chance at their business.  They keep the Marts and the Depots in
business.

Our target customer, the one who makes buying decisions
based on value rather than price, is going to buy from us, or from someone like
us. Our competition for that business is
the store down the street, or across town, who’s also an independent retailer. That competitor has the same problems that we
do. He or she is trying to tell the same
value story that we are.

If we’re going to consistently win the business, it’s
critical that we provide our customers with a pleasant, fun place to shop.  The difference between an independent retailer and Wally World is obvious.  The difference between two independents may be more subtle. 

Qustion, "What are you doing to make your store customer friendly?"

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.

Value

This is the third 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.

The second trend Stanyon identifies is Value Equation.  He says that "American consumers are becoming more interested in getting more value for their money and less interested in getting less for less." 

As we noted in an earlier post, Your Business Strategy "’Always the low price’ doesn’t move everyone.  Year-to-date through April, 2006, Mercedes Benz sales in the United States are up 15.9%."  Today’s consumer wants quality and  low price.   Since you normally can’t have both, her actual purchase will fall somewhere along the line between low price/low quality and high price/high quality. 

Our jobs as manufacturers and retailers is to come up with a mix of quality and price that equals the customer’s definition of "value."  A certain amount of value can be designed into the product, but the independent retailer has the flexibility to add services at the point of sale that increase value without adding substantially to the cost.

Whether it’s after-sale service, delivery, installation, or a play area in the store to occupy the kids while mom and dad shop, each dealer can provide added value to their particular customers. 

Stanyon points out that "the traditional power structure has permanently shifted from sellers to buyers….Buyers now hold the trump card."  Every customer is different.  Every customer’s definition of value is different.  The mass retailers can only market to the "average" customer.  The independent can market to every customer.

Personalization

This is the second 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.

 First, some background. Ninety percent of all American businesses employ fewer than 20
people. Small business accounts for 40%
of the GDP and 66% of all jobs created in the past 25 years. According to the New York Times, in 1970
there were sixteen entrepreneurship programs in colleges and universities in
the United States. In 2004, there were 1,500.

 More than 95% of all retailers have only one outlet. Almost 90% have sales less than $2.5 million
and more than 98 percent have fewer than 100 employees.

 In his research, Stanyon uncovered eight trends and six
challenges that are more or less universal to all independent retailers. Some trends may help the smaller retailer,
some may hurt. Either way, understanding
these trends may be crucial to the growth, or even the survival, of your
business.

 Today, let’s take a look at trend number one: Personalization

 In an earlier post, “Say Goodbye to the ‘Mass Market’”, we
discussed personalization. The growth of
new media, especially cable television and the internet, has made “narrowcasting”
possible. Narrowcasting is the opposite
of broadcasting. Instead of listening to
the music that some program director has decided to play on your favorite radio
station, you can go to I-Tunes, download your favorite songs, and create “play
lists” to fit any occasion.

 Instead of watching an hour of news to get to the handful of
stories that actually interest you, you can set your internet home page to
display only the news that you find interesting. If you’re only interested in local news, you
can have it delivered right to your desktop. If you’ve moved from another city, you can have the news from your old
hometown delivered right along side the news from your new one. And, most of the time, there are links to
video, and audio, and more stories on the same topic.

 If sports are your thing, you can pick the sports you care
about, even the league or the teams, and the scores and stories are right there
whenever you want them along with video clips.

 With that kind of personalizaton in information services, it
just makes sense that today’s consumer expects her shopping experience to be
personalized, too. The good news is that
the independent retailer is the one in the best position to deliver that
personal experience. As Stanyon points
out, the chains have the sophisticated technology for database marketing and
promotions; you  know the customer
personally. “So wile big companies
employ slogans like “reach out and touch someone,” it is more likely the small
independent retailer can actually shake their hand.”

Personalization is one trend where the independent has a
HUGE advantage over the big guys. What
are you doing to take advantage of it? Comment below.

 Tomorrow: Value
Equation