Buy American-How Can We Help?

There’s an interesting article at Embarq.com reporting on the “Buy China” rules that Bejing has imposed on government-funded stimulus projects.  China has instituted the rules, similar to the “Buy American” provisions of our own stimulus package.  It doesn’t take a degree in political science to expect other countries, especially China, to retaliate against US policies that encourage the large-scale purchase of domestic goods.  In fact, both China and the United States already  have “buy domestic” rules in place for all government purchases.

In reality, there are enough loopholes in the American laws to allow the purchase of imports in many, if not most cases.  Given the usual price difference between American-made and Chinese-made goods, it would seem that Washington’s “Buy American” rules have less teeth than Bejing’s policy, especially with the Chinese governments financial support of its domestic manufacturers.

Let’s be honest.  Washington is not the answer to shoring up domestic manufacturing. China, and other countries, may retaliate against any government “Buy American” initiative.  The real answer to the problem lies with you and me. As consumers, we should do our homework and buy domestic products whenever possible.  As business owners, we must offer our customers an American-made option whenever possible.

You may think that domestic products are more expensive to buy, and in many cases you’re correct.  But when you consider the total cost of ownership, American-made merchandise has the edge, more often than not. The $5.00 Chinese widget you buy from Wally World may have a usable life measured in months while its American-made $10.00 counterpart’s life is measured in years.  Our landfills are full of “bargains” that were manufactured in the People’s Republic and other third-world countries.

While government-imposed “Buy American” regulations may prompt retaliation from foreign governments, you and I deciding to buy domestically-produced products, on our own, for the right reasons, isn’t likely to inspire the same response.  Let the market choose higher-quality American-made goods and offshore competitors will be forced to increase their quality in order to compete.  On a level-playing-field our manufacturers will win every time.

Here’s something that bothers me. I’m no expert on international economics, or military materiel, but I’m surprised that no one else seems to be talking about this.  When the Japanese attacked Pearl Harbor, the United States was ill-prepared to fight a world war on two fronts, especially with the massive destruction of our Pacific fleet.  We won the war because we were able to quickly convert domestic manufacturing to build ships, airplanes, tanks, guns, and other necessary military equipment.

While the men went off to fight, Rosie the Riveter stayed at home making the tools to wage war.  It was an American team effort that led to total victory in Japan and Europe.  Hopefully there will never be another World War, but it’s always a possibility.

If such a conflict were to break out, where would we turn for the tools of war?  Would we buy planes from China?  Would we expect Italian-owned Chrysler to convert from auto manufacturing to building military vehicles?  Would Toyota and Nissan be willing to build tanks and humvees in their US plants?  Or would we rely on American factories that make toasters and coffee pots to product the necessary guns and ammunition?

Hopefully there will never be another large-scale military conflict, but with North Korea threatening to fire a nuclear missile aimed at Hawaii, we have to be prepared.

We can’t be paranoid, but it’s definitely something to think about every time you shop for a new car or pick up anything marked “Made in China.”

Why Retailing Will Never Be the Same Again?

Forbes gets it wrong! In an article called Why Retailing Will Never Be the Same Again, and What to Do About It, two business consultants discuss the problems that big retailers are having in the current economy.

The authors cite the bankruptcies of Circuit City, Linens n Things, and other big retailers.  What’s a poor big box chain to do?  ” One solution”, they say,  “Retailers that can’t compete on price or convenience have to find another way to differentiate themselves–with distinctive offerings, and with engaging customer experiences that drive home what’s compelling about those offerings.”

Imagine that!  If chains are going to compete, they have to act like independents.  What a concept!

The important thing to remember here, especially when we get discouraged by slow sales or cut-throat competitor pricing is that the big guys are having problems too.  And, high-priced consultants are telling them to do the things that we’re already doing.  Maybe some day they’ll catch up, but I doubt it.

Here’s a comment I posted to the Forbes article:

What about independent retailers? While independents account for a large percentage of retail trade in the United States, more than 50% in some categories, this article ignores them completely.

While smaller retailers are feeling the pinch of the current economy, many are enjoying excellent sales and profits. Good customer service, localized selection, and flexibility that the chains can’t possibly achieve are driving their business. Ironically these are the same attributes that you suggest retailers adopt.

The retailing world isn’t all about Wal Mart and Amazon. Thousands of independent retailers are thriving, not just in spite of, but often because of the poor service provided by the big boxes.

Considering that this is National Small Business Week, it’s amazing that you would omit such a large part of the retail landscape.

How Not to Halt a Sales Skid

Imagine this conversation:

Boss:  “Sales are in the toilet.  Does anybody have any suggestions to improve sales?”

Staff member:  “I know!  Let’s raise prices!”

Boss:  “Brilliant!  Why didn’t I think of that?  Let’s do it!”

You’re probably thinking “That’s ridiculous!  Nobody would raise prices in the face of declining sales.”  But that’s exactly what the US Postal Service did this week.  With email taking the place of traditional mail and with private competition taking over the package delivery business, they raised the price of a letter to 44 cents, an almost 5% increase while threatening to cut delivery service.

This former monopoly is in a race to oblivion and they only have themselves to blame.  It does make you wonder if the government taking over banks, the auto industry, and health care is really such a good idea.

A Win/Win for Buy Local

bunnAround here we’re pretty much coffee fanatics.  At least my bride is.  The doctor took me off caffeine a couple of years ago so I guess I’m a faux-coffee fanatic.  Anyway, recently our faithful Bunn started leaking water.  Not a lot of water, but enough to be a pain in the neck.  There’s nothing worse than dropping the mail on the counter and watching the water-soaked envelopes floating away.

So, my wife began a quest for a replacement.  There was no debate that it had to be another Bunn.  Our old faithful machine had lasted for many years.  Besides, it’s American-made.    The problem was the color.  She wanted white but most stores carry it only in black.

Today she purchased her brand-new, American-made caffeine dispenser from Handyman Hardware, a True Value located just a block from our house and most definitely a locally-owned business.  And the price?  Right in line with the chains advertised prices.

It’s just another example that local doesn’t mean “high priced” and in fact local can mean better selection, often the difference between what you really want and what you have to settle for.

Buying Locally–Are There Limits?

A regular reader and former coworker emailed me over the weekend with an interesting question about buying locally.  He asked, “At what point is price an issue?” He cited a couple of recent instances where he paid more to buy something locally rather than buying it online.  The price difference wasn’t enough to be a problem, but is there a point where price trumps doing business with a neighbor? It’s not unlike the question, “Can you be a little bit pregnant?”

The question raises still more questions!

Aren’t some mail order businesses run by independent business people? In the past I have written good things about Heather Gorringe and her “Wiggly Wigglers” online gardening business. (A Small Business Owner Who Knows How to Use Social Media. A Big Award for Wiggly Wigglers) You can’t lump her into the same category as Amazon.com.  I’d buy from Wigglers if I were into gardening (and if she weren’t in England, making shipping very expensive.)  It’s a global mom-and-pop operation, something that would have been impossible just a few years ago.

What does “local” mean? Here in Saint Louis, at least until last year, Anheuser-Busch was a local business.  Was I supporting local business by buying Budweiser?  Yes I was.  But what about local micro-breweries?  Wouldn’t drinking a beer from Schlafley (a local micro) be more in line with a Buy Local philosophy?  And what about Guinness which is unique and only brewed in Ireland?

Then there’s the issue of determining what’s local and what’s not.  McDonald’s is a national chain, but the individual stores are locally owned. Then again, all of their raw materials come from McDonald corporate.   On the other hand, there are some similar operations, like White Castle, where the company owns all the stores.  How many people know that?  How do you know which is which?  Given the addictive taste of a White Castle burger, and their low cost, does it really matter if I eat there?  Like Mickey D’s, they bring the stuff in from out of town.

Does buy local trump buy American? Chances are that you’ll be more likely to find American-made items at your local hardware store rather than at Lowes or Home Depot.  But, what if you don’t?  What if the chain has an American-made drill and everything at the local True Value is made in China?  Which is the better choice?

bookstoreWhat about unique items? Again, the local merchant is more likely to have the really unique items, but not always.  Books are a good example.  Sometimes the only place to find an off-beat book is at Amazon.com.  Let’s say that the local book store (if you can find one) doesn’t have the book, but can order it for you.  It will cost $50.00 and take two weeks.  Amazon can get you the same book in two days and it will cost you $40.00 (including shipping and handling).  And you need the book for an important project that’s due in a week.

This one is pretty easy.  You have to go with Amazon because of the deadline.  But what if there is no deadline.  What if you just want to read the book?  Is it worth ten more dollars and twelve more days to support the local business?  Nobody said this was going to be easy.

Buying locally takes some effort.  But it’s worth it.  You wouldn’t be reading this if you didn’t have a vested interest.  If you want your friends and neighbors to do with business with you, you have to do business with them.  It’s as simple as that.  That’s the short-term answer.

Long term, if you want to have a neighborhood hardware store hardware-storeto answer your questions, and to have the part for your twenty-year-old lawn mower in stock, then you’d better do your part in keeping them around.

A lot is being written and said about economic stimulus.  I’m not an economist, but I do think that stimulating the national, and even the world, economy starts with stimulating the local economy.  We all know that small business is responsible for the lion’s share of jobs in the United States.  A sign of a healthy economy is a lot of “help wanted” signs in the windows of our local stores and restaurants.  We can make that happen.

I just realized that I’ve written quite a bit, 698 words and counting, and haven’t answered the question, “At what point is price an issue?” First, I think you have to look at value rather than price.  And value includes the services and potential services that the local business offers.  What looks like a better price may not be.  In the case of on-line purchases, have you considered shipping and handling?  What about the hassle of receiving the merchandise (for example, taking off work to be home when the package is delivered) and the possible hassle of returning something that isn’t right?  Can you trust the vendor to deliver the product as ordered?  All of these come at a price.

If you’re comparing a local store versus a chain, are you comparing apples to apples.  The big guys often have products that are built to their spec, which may not be your spec.  An items that’s ten percent cheaper but wears out twice as fast as a similar one isn’t much of a bargain, is it?

If an item requires assembly or technical knowledge to operate, who’s going to help you out if you have problems, the “helpful hardware man” or the guy in the blue smock who just started to work yesterday?

To wrap this up, you have to make up your own mind what you value and what you don’t.  Everything has a price.  You get what you pay for.  (Insert your own cliche here.)

As a business person you might want to do unto others as you would have them do unto you.  But what about your customers?  How do we get them on the “buy local” bandwagon?  It’s all about education.  Show them why your product is worth more than your big box or out-of-town competitors.  Use in-store signage, advertising, your web site, and your presence on social media (you are on social media, aren’t you?) to tell them why it’s in their best interest to buy from you.  Because, when all is said and done, people do what’s in their best interest, not yours.

I’d especially welcome comments on this important topic.

macy’s Is Learning

macys2In an article called “Macy’s Discovers the Strength of Independent Retailers”,  “Retailing Together” reports on Macy’s recent announcement that they are laying off 7,000 workers and moving the merchandising and buying decisions into local district offices.  It seems that Macy’s has discovered that markets are different and that consumers, especially in the Midwest, like to have a part in the buying decision, too.  Imagine that!

Here in St. Louis, our traditional department store was Famous-Barr, part of the May Company.  When Federated Department Stores bought May in  2006   , the promise was that local management would be retained and that shoppers would notice little difference.  But it didn’t take long to see changes in the stores’ merchandise.

Famous-Barr became Macy’s and buyers located in the Midwest were replaced with national buyers.  Turns out not to have been such a great decision.  Now Macy’s is doing a 180 and trying to recover lost customers and sales.

Meanwhile, independent retailers just keep on doing what they’ve been doing all along.  If ladies in Missouri like a certain style of shoe, the local shoe store has them while Macy’s has been trying to force them to wear something else.

If gentlemen in Iowa prefer tweed sport coats, that’s what the local men’s shop is carrying while the national chain’s trendy offerings crowd the closeout rack.

On the other side of the coin, the agility and flexibility of the local merchant make it much easier for them to react when local tastes do change.

I hate to age myself, but I was working for a national retail chain in the early ‘7os.  The disco craze made Nehru jackets a hot item.  All the local stores (including Famous-Barr) had them in stock.  By the time my company’s buyers in New York reacted to the trend, got orders through the beaurocracy,  and got merchandise into the stores, I got my Nehru jackets the day after all the local stores had put them on closeout.

Not much has changed.  Customers are still  looking for value, not just price.  They’re looking for personal service, not an hour-long wait in a checkout line.  They’re looking for a place, like Cheers, “where everybody knows your name.”

And that, my friends, is what independent business is all about.

Does Wal-Mart Really Hurt Small Business?

Last week Business Week online posted an article with this title.  The article cites research done by Russell S. Sobel and Andrea M. Dean of the University of West Virginia.  Their conclusion? 

“Contrary to popular belief, our results suggest that the process of creative destruction unleashed by Wal-Mart has had no statistically significant long-run impact on the overall size and profitability of the small business sector in the United States.”

Always willing to take one for the team, your intrepid blogger has read the twenty-two page study so you don’t have to.  However, if you care to, you can find it here

To make a long story short, Sobel and Dean suggest that we must look at the big picture before we decide whether Wal-Mart has had a negative impact.  They fault earlier studies that looked at the data on a county-by-county basis.  This, they say, doesn’t give us an overall perspective of the issue.  In other words, if a hot dog stand opens up in Seattle, that cancels out the loss of a 100-year-old independent hardware store in a small town in Georgia.  One business opened, one business closed = no impact on small business.  Tell that to the third-generation owners of the hardware store.

They also point out that other businesses often take over the locations of the businesses that have closed with the arrival of the “world’s largest retailer.”  Their example is an art gallery that moves into that hardware store’s formal diggs.  That’s supposed to be an equal swap. 

Here’s where I believe their argument breaks down.  For the sake of round numbers, let’s say a small grocery store had been employing five people, including the owner.  Let’s say that they generated $100,000 in pre-tax profit on $1,000,000 of sales their last year in business, which included $200,000 of locally grown produce, locally produced bakery goods, and locally grown meat.

When Wal-Mart comes to town the grocery store goes out of business and is replaced by Sobel and Dean’s art gallery.  The art gallery owner is the only employee and he generates $100,000 in pre-tax profit by selling paintings that he painted himself.  He doesn’t pay himself a salary, so the $100,000 is his total income from the business. 

What’s the difference?  The difference is $900,000 in local economic activity, four jobs, and $200,000 not spent with local farmers and bakers.  The art gallery does minimal advertising where the grocery store was in the paper every week.   Because of the exodus from downtown, the art gallery pays only 60% of the rent that the hardware store paid and one out of every four store fronts on main street is empty meaning rents will probably go down even more.

While the grocer had dozens of regular customers who would come downtown each week to shop, often visiting the other stores in the area and eating lunch, the art gallery has a few high-end regular customers, but they may only come into the gallery two or three times a year.  According to the study, the two businesses are equal. 

Of course people don’t stop eating.  Those grocery dollars are still being spent and jobs are being created.  But a self-service grocery “super center” doesn’t create the same number of jobs relative to their sales volume. And, at the end of the day, the receipts are forwarded to Bentonville, AR, not to the local bank account of a local owner.

Academics may be able to generate charts and graphs to prove that local economies do just fine when all the business goes to out-of-town corporations, but real people in real towns know better.

What’s the Competition Up To?

Mark Riffey over at the "Business is Personal" blog asks the musical question, "Are you paying attention to your competition?"  He points out that last week, when Mozilla released the new version of the Firefox browser, the Internet Explorer team at Microsoft sent them a cake to congratulate them on their achievement.  What a great idea!

Clearly the boys and girls from Redmond, WA are watching their competitors.  But, are you?  If not, it’s like driving an Indy car with a blindfold on.  You may be able to find your way around the oval track, but if you don’t know where the other cars are, you’re probably going to crash and burn.

In another life, BT (before Tacony) I called on Wal-Mart, K-Mart, and Woolco (out of business along with their parent, Woolworth’s).  Like all guests, I had to sign a visitors log book.  The majority of the names in the log were always competitive shoppers.  The Marts shopped each other, they shopped Woolco, and Woolco shopped them.  It wasn’t a secret.  Every body knew everybody else.  The only rule was that they never carried a notebook or recorder.  They could take away as much information as they could carry in their heads.

Today information is much easier to find, what with the Internet and all, but sometimes you still have to dig.  When was the last time you took the time to shop the big boxes?  What about your direct competitors, other independent retailers? 

We used to have a competitor in the ceiling fan business who would visit all the other fan companies at the end of the big industry trade show.  The object of the visit was to exchange catalogs and price lists.  He felt like everyone was better off if we all had the right information, and he was right.  There are no secrets in most industries anyway, so why be enemies?

But even if your particular marketplace isn’t open to such a friendly approach to competition, you still need all the information you can get to compete effectively.  You might not want to go so far as to send your biggest competitor a cake when he opens a new location, but it couldn’t hurt, could it?

Suggestion:  Set up a Goole News Alert for yourself, all of your competitors, and for the lines they (and you) carry.  Whenever any of the names of phrases you’ve selected shows up on the web, you’ll get an email. 

Google_alert

Hint:  Be sure you choose "Comprehensive" from the "type" drop-down list.  That way you’ll receive alerts when the search term comes up in a blog or on a web site.

Halloween–The New Thanksgiving?

Halloween_turkey
According to the Dallas Morning News, Wal-Mart is promising (threatening?) to offer "Black Friday" pricing beginning this Friday, Nov. 2 to coincide with the opening of their in-store Christmas shops.  [Black Friday is the media’s name for the day after Thanksgiving, so-called because it’s traditionally considered the day that retailers first turn a profit for the year.]

Wal-Mart isn’t the only retailer jumping the gun on the traditional Christmas shopping season.  I’ve noticed trees and other decorations on display in several stores for at least two weeks, maybe longer.  It’s doubtful that even the mighty Wally World can change the decades-old tradition of taking the day off work to go shopping on Thanksgiving +1, but if their prices are low enough, they’ll probably have an effect on total sales for the day.

The thing that concerns me is that the doom-and-gloom media will look at the numbers for November 23 and declare that they’re off from last year signaling a decline in consumer spending for the season.  Will they be conscientious enough to dig into WM’s results for this weekend before they make their dire predictions?  We’ll see.

Why the suspicion of the media’s reporting on matters economic?  Maybe because of the recent glut of reporting on the sorry state of the US economy.  Anyone paying attention to the news reports might consider putting his/her life savings under the mattress.    But, here are some economic results released today:

  • According to the ADP Employment Report, non-farm private employment grew by 106,000 in October.
  • The Labor Department announced that total employee compensation rose 0.8% for the third quarter.
  • The U.S. Bureau of Economic Analysis showed the the U.S. economy expanded at a faster than expected pace in the third quarter.  GDP growth was 3.9% compared to the 3.1% rate expected by economists.  The second quarter growth rate was 3.8%.
  • On a year-to-year basis, GDP growth was 2.6% in the third quarter, compared to 1.9% in the same period last year.

Bottom line?  As we posted earlier this week (How’s YOUR Economy) the only economy that matters is YOUR economy.  We’re coming into the most important time of the year for most retailers.  This is when we all need to be on our game.  Don’t let gloomy economic predictions that may or may not come true affect the way you run your business.  Be aware of your competition, but don’t lay awake nights worrying about them.  You’ll get your share of the business by being the best YOU that you can, not by trying to be something you’re not.

Keep doing what you do best and let your competitors lay awake at night worrying about you. 

Happy Halloween!!!

Yet Another Post on Competing with the Big Guys

Competing with the big boxes is a subject near and dear to our hearts and it’s always good to hear from someone who’s doing it successfully.  Mark Riffey’s Business is Personal blog tells us about a Whitefish, MT arts and crafts retailer who has found the right formula. 

Rick Latta, the store’s owner says “I can’t compete with Wal-Mart prices, but Wal-Mart doesn’t walk
customers through projects, give them ideas, teach them tricks or have
a studio with tools where people can come and work and ask questions.".

Quoting Riffey, now, "This is where you make a difference by hiring the right people
(experienced in those crafts), paying them a little more so they don’t
have to work at Wal-Mart, and more importantly, doing what Wal-Mart
simply won’t do.?

I couldn’t have said it better myself.