Practicing What You Preach

Apologies for the long gap between posts. I’m afraid it’s been a very busy few weeks.

One of the basic premises of Saint Benedict’s Rule for living the monastic life is consistency. It’s also a good rule for running our businesses. Obviously what we believe is important, but it’s even more important to be consistent in our beliefs.

There’s a running battle (Maybe battle’s too strong a word, disagreement may be more appropriate.) between the lovely and talented Mrs. B and your favorite blogger over the topic of Wal Mart. As a small business czar, I find her shopping for groceries at Wally World to be problematic. We’ve compromised on her alternating between the local grocer one week and Wal Mart the next.

It’s not a perfect solution, but for now it’s the best the Irishman and the German can do. It’s an uneasy truce. Sometimes spouses can influence everyone except each other. (She’s a weight-loss counselor. I’ve obviously remained immune to her arguments. Another standoff.)

I thought about this recently while I was trying to catch up on my podcast listening and watching. Andrew Lock does an excellent weekly video blog called “Help, My Business Sucks!” Recently he praised Hertz Rent a Car for their marketing strategy involving built-in GPS units in their vehicles. Hertz has long been at or near the top of the rental car industry stressing quality over price.

Then, just two episodes later Andrew tells us that he rented a car from Thrifty and that he had a number of problems with both the car and the company’s service. Andrew, buddy, you’re not being consistent.

This blogging stuff isn’t as easy as it looks. Oh, yes, it’s easy to sit at the keyboard or the microphone and offer good advice to others. But when the rubber meets the road, sometimes we have to make hard choices. “Buy American” I type on my Thailand-made keyboard. I pontificate “Buy local” while I munch on my White Castle burger. Andrew tells us to emulate Hertz but rents from Thrifty.

Sometimes we have no choice. As far as I know, there are no American-made keyboards and White Castle doesn’t play fair. Their burgers are addictive. If there were a local restaurant with an equally-delicious sandwich, I’d eat there in a heartbeat. (At least until their burgers clog my arteries to the point where I have no heartbeat.)

Here’s the thing. Mike Buckley, and Andrew Lock, and you must be as consistent as possible. I’ll keep trying to get my better half to buy her groceries from the local chain. I pointed out Andrew’s inconsistency in a blog comment. And you, my independent business owner friend, must patronize local business as often as you can.

If you’re a retailer, please don’t let your customers see you coming out of the warehouse club with a cart full to overflowing. Sometimes we have no choice, but when we do, the long-term success of the business is more important that saving a few cents on a box of soap powder.

Fighting the Big Boxes

Some one pointed me to this video today and I thought I’d share it with you along with a few thoughts. The film isn’t new. It’s been around for a few years. But it’s worth watching if you haven’t seen it before.

Independent America

Independent America

One thing that concerns me a bit is the lumping of big-box stores and franchised fast-food places together. The 3/50 Project which MTS has supported almost since the very beginning does this too. If my neighbor owns the local McDonald’s franchise, I don’t see why I should boycott Big Macs. Granted, some of the restaurant’s revenue goes to McDonald’s corporate, but the bulk of it stays right here. That’s a far cry from he huge share of revenue from the local Wally World that ends up in Bentonville, AR.

The other thing that disturbs me a little is the tendency to bash the big boxes rather than pumping up the local merchants. It reminds me of walking through the woods. If you don’t watch where you’re going and you step on a snake, there’s a good chance the snake will bite you. If it happens, don’t blame the snake. He’s just doing what snakes do. Same for the boxes stores. They’re the most predictable of competitors. They’re going to do what they always do. Don’t play into their hands.

I’ve covered this before, but it bears repeating. Don’t try to compete with the chain stores on price. You can’t win! With their deep pockets they can lose money for a while, just long enough to put you out of business. Avoid going head-to-head. Find your niche and stick to it.

Most important of all, rather than fighting to keep a national chain out of your market, fight to keep your local government from subsidizing the big box with your tax money. There are enough small-town and even big city governments desperate for tax revenue that they’ll do whatever it takes to get the chain to locate within their boundaries. They do this by direct tax breaks and by indirect tax breaks. (We’ll widen the street and put in traffic lights at city expense.) As a taxpayer, scream bloody murder about this nonsense. Using your tax money as an incentive to bring a competitor into your marketplace should be cause to terminate the local government at the next election.

To me, there’s nothing quite as ridiculous as a local government who whines about the deteriorating downtown area while they pump your tax dollars into an infrastructure that encourages people and businesses to move to the outskirts of town.

Finally, adopt the “serenity prayer.”

“Lord, grant me the serenity to accept the things I can’t change, the courage to change the things I can change, and the wisdom to know the difference.”

The Marts and the Depots aren’t going away anytime soon.  Remember that every one of them started out with one store, just like you did.  What can you learn from them?  Study their operations.  Read anything you can find about their operations.  Then, do it better than they do.

They have greeters.  At your store make sure they’re greeted by the owner.

They have a liberal return policy.  If you have a sign that says “no refunds” or something like that, get rid of it!   Offer loaner programs.  Make sure your vendors back you up as well as they do the chains.

They have convenient hours.  Most likely you can’t afford to be open 24/7, but you do have to be there when they need you.

You have a number of advantages over the national chains.  Find out what they are and use them to your advantage.

Retailers, What to do about the Internet?

I’ve been following a conversation on another forum that was started with my recent post, “Are Your Suppliers Letting You Down on the Web?”  You may recall that the original article was about manufacturers who don’t use the web effectively to communicate with their dealers.  Like most on-line conversations, this one has morphed into a discussion on how independent retailers and manufacturers should handle Internet sales to consumers.

We know that there are price-only shoppers who will come into your store, get all the information they need, then go to the web to buy the item at the lowest price they can find.  On the other hand, there are customers who do their research on the web then buy the item locally.  The question is, which group is bigger?  My guess, and it’s only a guess, is that more consumers fall into the second group.

Maybe I’m not a very good shopper, but I’m in the second group mainly because I (1) prefer to support my local merchants and (2) I’ve yet to find anything on line that I couldn’t buy at the same price, or close to it, locally.

Here’s the thing.  If I can buy an item for, say $200.00 on line and I can buy it for $210.00  or $220.00 locally, I’ll buy local every time.  Basically, I’m a mechanical idiot.  It’s worth it to me to spend an extra 5-10% to have somebody close by to hold my hand when I can’t figure out how to make something work.  I’m not alone.  Based on the statistics, a lot of people feel the same way.

Case in point:  I just bought a new cell phone.  The instruction book wasn’t in the box.  Today I’ll go back to the store and get it.  If I had bought the phone on-line, I’d have to send an email and wait for a response.  Assuming they get back to me, I’ll then have to wait for the instruction book to come in the mail.  Meanwhile, I have a $179.00 phone that I can’t use properly.

To me, the key to competing with on-line merchants is to let the customer know how much your service is worth.  Granted, some people just don’t care.  All they’re interested in is getting the lowest price.  Chances are those people aren’t your customers anyway.  If there were no Internet, they’d either buy from the big box store, or they’d be searching the ads in the back of the magazines.  Either way, you don’t get the sale.

There’s a lot of hype about on-line merchants.  The media love them!  Price shoppers think they’re the greatest thing since sliced bread.  (I wonder what the greatest thing was before somebody invented sliced bread?)  Anyway, the facts don’t necessarily support the hype.  Depending on the industry, web sales still represent a small piece of the total pie.  According to the US Department of Commerce, 3rd Quarter 2009 on-line sales represented 3.7% of all retail.  Obviously the percentage varies by industry, but overall, nine out of ten retail dollars are spent at brick and mortar stores.

e commerce stats

Big on-line merchants like Amazon.com are doing very nicely, thank you.  But there’s still a huge market out there for your store.  Rather than chasing sales that you’re never going to get, in 2010 your brick and mortar customer should be your major focus.

Granted, on-line sales are growing, 4.7% in the third quarter of ’09 vs. 4.3% in ‘o8.  Today’s strategy may not work in the future but carpe diem,  seize the day.

Meanwhile manufacturers will continue to wrestle with the question of how best to market their products.  That 4.7% is worth more than $30 billion, hardly chump change.  Like I said in my last post, brick and mortar independent retailers should support suppliers who support them.

Here’s a post that I wrote in 2006 on Your Business Strategy that you might find interesting.

Chinese Imports, again

I must have ESP (or some other cable network).  Yesterday I mentioned that US government-imposed restrictions on Chinese products might have consequences.  You may recall that I suggested a more grass-roots approach to the problem of cheap Chinese goods.  Lo and behold, our government did just what I suggested that they not do yesterday.  (Big surprise!)

The government has imposed new duties on Chinese steel pipe.  Chinese pipe manufacturers have been taking advantage of subsidies by their government to dump low-priced pipe on the US market, costing thousands of American jobs this year.  It’s hoped that the tariffs will slow down the flood (pun intended) of low-price, low-quality steel pipe and restore lost American jobs.  Stay tuned to see how the Chinese respond.

I promised yesterday that I’d give you a little insight into the process of sourcing Chinese goods, from a manufacturer’s perspective.  Here goes.  For the last year before my “retirement” I was involved in purchasing new items for my former employer, specifically small electrical and furniture items.  It was a very frustrating and disappointing task.

For the most part, Chinese manufactures aren’t set up to supply quality merchandise.  In fact, it often seemed like a “foreign” concept to them.  While we may try to spec a premium item from them, they are geared up to produce “low price” items for the mass merchants.  When their production lines are set up to produce millions of “just good enough” items for the big box stores, an order for a few thousand quality items just isn’t worth their time.  Make no mistake, the big boxes and their big buying power are very much in charge of the products that are shipped to the US, even to other suppliers.

Here’s a typical scenario.  I would email a supplier asking them to send me a sample of an item based on my specifications.  A few weeks would go buy and samples would arrive that basically were nothing like I asked for.  Nine times out of ten they would fail our QC tests.

I would send the testing results to the manufacturer asking them to correct the problems and send me what I asked for in the first place.  A few weeks would pass and I’d get new samples, exactly like the first ones.  Strike two!

Keep in mind that we were paying high air freight rates to get these samples shipped to Saint Louis.

This would go on for several cycles and maybe, if we were lucky, we would finally get something close to what we asked for.  Sometimes we never did get what we wanted.

I spent over a year working on two particular items and never did get what I wanted.  Often the response was that such-and-such big box chain sold thousands (sometimes millions) of the inferior products and why was I so particular?

A simple process of building something that would pass minimal quality standards took months and often never did result in a salable product.  If I had hair, I would have pulled it out.

Bottom line, there is no motivation for  the Chinese manufacturer to build anything above minimal standards.  They flood the market with low-priced, low-quality merchandise.  American manufacturers can’t compete.  So, they either lower their quality to reduce the price, or move their operations off shore where labor costs and benefits are much lower than they are here.  Even then, they are going to face higher returns and damage to their reputation because the imported goods aren’t what their consumers expect.

Don’t get me wrong.  I have Chinese friends, including some who I’ve worked with as suppliers.  Because China is a totalitarian state, they are under a lot of pressure to tow the company line.  Language problems and a society where the Chinese people are accustomed to low-quality products often make it almost impossible to explain to them that we want good products.

The solution, as I pointed out yesterday, is for American consumers to demand quality and to be willing to pay for it.  Until that happens, this problem is only going to get worse and at some point it will be too late to fix it.

Chinese Checkers (and everything else)

My end-of-the-year rant.

Earlier this week several local newspapers carried  an AP story by William Foreman on China’s booming economy. He begins by pointing out that hundreds of US manhole covers were stolen all over the country and sold on the black market to be made into steel for Chinese skyscrapers. Thank goodness! I didn’t think we were exporting anything to China anymore.

Foreman points out that China is one of the biggest investors in Africa.  Of course we all know that the Communist nation holds billions of dollars of US debt ($800 billion in Treasury securities) which may prove to be disastrous sooner, if not later.

China’s telephone company has more than 1/2 billion customers and 338 million Internet users, more than the entire population of the United States (307 million).

China’s new-found prosperity has led it to become the biggest polluter on the planet.  The article points out that 16 of the 20 worst cities for air quality are located in China.  So while the United States is looking to spend billions of dollars cleaning up the air, both here and in developing countries abroad, China just keeps on polluting and taking American jobs in the process.

Meanwhile our insatiable desire for the cheapest price on everything continues to fuel the Chinese engine while our own is sputtering to a stop.  Will the two giant Chrysler plants in suburban Saint Louis ever reopen?  Probably not unless a foreign (possibly Chinese) company buys them.  Have we passed the point of no return?  I hope not but a lot of things are going to have to change pretty quickly.

People (American people, that is) have got to learn that it’s not cheaper to buy a cheap Chinese product that doesn’t work properly and doesn’t last.  It’s more expensive in the long run and that’s just in out-of-pocket expense.  It doesn’t take into account the loss of jobs and the selling off of the American dream that’s taking place today.

It’s pretty obvious that we can’t count on our government to help us.  In fact any kind of tariff on Chinese goods could cause them to retaliate which wouldn’t be good.  (Remember that $800 billion in Treasuries that they hold.)  So, while an official boycott may not be in order, there’s nothing stopping you and me from individually avoiding their stuff.

No, you and I are the answer.  Don’t buy cheap Chinese crap! Spend an extra buck and get American-made quality.  Of course the real problem lies in the products that are no longer made in the USA.  The list is quite long.  Try to find an American-made sewing machine.  Let me know how that works out for ya.

But we have to start wherever we can.  Buy American cars (while you still can).  For crying out loud, if the Chinese attempt to penetrate the US automotive market (which they probably will very soon) don’t buy one! Even the Chinese don’t like Chinese cars.  Anything else you buy, look for an American label.  If you can’t find one, ask the retailer why not.  We’re all in business to satisfy our customers.  If there’s a demand for American-made widgets then the market will satisfy the demand.

I don’t want go on too long and I don’t want to give the impression that I think things are hopeless.  Far from it!  We’re about to begin a new year and a new decade.  It’s time for all of us to stop being selfish and/or foolish and recognize that this is the greatest country in the world and we can overcome anything.  We just have to get of our backsides and make something happen.

Thanks for putting up with my rant.  Here’s wishing you a very, very

Happy New Year!

2009

2010

Come back tomorrow and I’ll wrap up the year by telling you about my experiences in buying Chinese.

Christmas Eve Eve

Here we are on the twenty-third day of December, 2009.  We’ve almost completed the first decade of the twenty-first century and it’s certainly been a challenge.  The fact that you’re reading this is a sign that you’re one of the best of the best.  You’re a competitor and a survivor.  Congratulations!

No one knows what 2010 will bring but I suspect it will be interesting.  The current administration doesn’t seem to be a friend of small business in spite of their claims.  As I’ve said here many times before, small business is the engine that drives the American economy.  That’s been true in good times and in bad.

So, as we prepare to celebrate Christmas and the beginning of a new year, keep the faith!  Keep doin’ what you’re  doin’ and take advantage of the agility that only a small business can muster to beat the competition.  I have confidence in you.

See the USA in Your ????

Chinese Chevy DealerHere in Saint Louis, a local car dealer, Frank Bommarito, often buys full page ads in the dead-tree newspaper to comment on business topics. He recently did a nice comment piece on the death of his competitor, Dave Sinclair.

But today, in a piece on China’s economic recovery, he made some comments that frankly, scare the hell out of me. Unfortunately the ad doesn’t seem to be available online, but here’s what he said in bullet points:

  • China’s economic recovery is progressing nicely. The one weak spot is manufacturing.
  • Chinese auto makers have been waiting for the right time to enter the US market. Our weak economy has held them back.
  • There are ten thousand US auto dealers who lost their American car franchises in the recent cutbacks by the “big three.”
  • These dealers will be lining up at the National Auto Dealers Convention in Orlando, more than happy to take on a Chinese car line.

After many years in the import business there are two sure things I can tell you about Chinese manufacturing.  One is they can undercut any American manufacturer based on their huge labor pool and cheap raw material prices.  The second is that they will build in as little quality as they can get away with.

American car dealers with no cars to sell will be very tempted to jump in bed with the Chinese.  Many of them will be eager to be pioneers in this new business.  At some point they’ll find out that undependable deliveries and inferior products will put them in a very difficult situation.  Trust me.  Been there; done that.

Of course, the high dollar value of a vehicle and the thousands of cars and trucks that will be brought in initially will further tip the balance of trade between the US and China, putting our fragile economy in even more trouble.

Hopefully Bommarito’s prediction will turn out to be wrong.  Hopefully our friends and neighbors who have lost their livelihood due to the mismanagement of American car manufacturers won’t be sucked in by the promises that the Chinese car makers are sure to make.  (Again, been there; done that.)

I sincerely doubt that our current administration  would dare take any steps to stop this disaster before it occurs, especially since we’re so deeply in debt to the Chinese.   In the midst of all the other turmoil in our capital, this whole thing could slip by under the radar with no one even noticing until it’s too late.

This might be a good time to write to your representatives and senators, voicing your objections to any more erosion of the US manufacturing base by Red China.