FEBRUARY 2007: BUSINESS TOOLS
Small-business strategies
Stop whining about Big Boxes and sharpen your game
There is always a lot of speculation and discussion regarding
who is at fault when a small retailer fails. Many people cite
higher fuel prices, poor location, shrinking labor markets and
even the weather as reasons why it is more difficult to succeed
today. However, a great many point directly at the influx of
mega retailers, superstores and category killers — a.k.a.
Big Boxes — into the area.
If you asked owners what a small retailer can do to compete
with a Big Box, you would get answers such as: “Enlist
the aid of your local politicians to intervene; get involved in
the zoning process; talk to your trade association about
‘protection.’” Still others will tell you to:
“Cut your prices; increase your advertising; make sure
your product mix is right; trust yourself; reset your inventory
frequently,” and so on. These are all worthy approaches
and there is some merit in each of these tactics. However,
instead of treating the challenge as an opportunity, most small
retailers continue doing business as usual and fail to answer
the overarching question, which is: “What should a small
retailer do to compete, period?”
Let’s face it, competition is an integral part of
today’s marketplace and it needs to be dealt with
head-on. Whether you are talking about competing against a Big
Box or another small retailer down the street, the competition
is just as real, just as intense and deserves just as much
attention.
Experience shows it is indeed possible, with the right
strategy and execution, for small-business retailers to not
only survive, but to prosper — even in the shadow of a
Big Box. The bad news is that success never happens
automatically and retailers too often go on conducting business
as usual and not paying sufficient attention to their own
business basics.
Successful companies (of any size) focus on improving the
three most important aspects of any business:
1. Employees
This includes the management team, organizational structure,
job descriptions, employee commitment and training. If the
employees don’t believe in the mission or don’t
understand the company vision they won’t compete
favorably over time with anybody.
Successful companies have a knack for hiring, developing and
retaining knowledgeable employees, thereby rendering better
customer service in sharp contrast to the Big-Box approach of
(under)staffing the store with poorly trained part-timers. The
important questions owners need to ask are:
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Is your company mission and vision correct?
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Does everyone understand it? Do they get it, believe it,
embrace it, and are they committed to it?
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Do the results reflect it and are employees rewarded for it?
2. Customers
This includes customer satisfaction, market segmentation,
profit-center development, product and service mix,
company branding, promotion and pricing. Unfortunately, pricing
is a very common whipping boy and gets the blame for many small
retailers’ failure to compete. Nothing could be
further from the truth. Price is only a differentiator in a
commodity-driven market and customers understand that a company
cannot be the lowest priced and still be the best.
Successful small retailers have managed to “brand”
themselves and their goods and services, to differentiate their
company from other competitors in the area. They are proud of
their company and know what it stands for. They realize they
need to consistently brand their product offerings and bundle
them with outstanding services tailored to their
customers’ needs in order to build and protect their
market position and command premium prices.
Successful owners also stay in close touch with their
customers. They talk with them regularly about their
customers’ needs and look to them for new product ideas.
They know the easiest way to find out what their customers
think is to ask them.
3. Cash flow
The third and most important aspect of a successful small
business is positive cash flow and reliable cash flow
projections. These financial indicators don’t lie and
really give the true financial condition of the company.
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Are you short of cash? Are you about to be?
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Do you have obsolete or excessive inventory? Are you
collecting your receivables on time?
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Are you current on your payments and can you service your
debt?
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Are you charging enough for your products and services?
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Are your costs in line with sales?
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How does your cash flow project into the future?
There is no doubt that the changes and efforts required of
small-business retailers to be successful in today’s
competitive environment are demanding, difficult and oftentimes
painful. But that is exactly what makes these efforts so
valuable and sets certain retailers apart from the
rest.
Ask yourself: Do you have what it takes? Are you willing to
commit to the activities and efforts necessary for your
success?
Retailers who adapt, change and stay the course will be
successful; they will build their competitive advantage and
they will carve out market niches and exploit opportunities
that will enable them to withstand the onslaughts of all
competition including even the largest discounters.
Those that won’t adapt don’t have a chance.
— John Stupfel,
Bridgespan Partners, Portland
BridgespanPartners@comcast.net
