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Small-business strategies: Stop whining about Big Boxes and sharpen your game

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Thursday, February 01, 2007

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:

  • Is your company mission and vision correct?
  • Does everyone understand it? Do they get it, believe it, embrace it, and are they committed to it?
  • 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.

  • Are you short of cash? Are you about to be?
  • Do you have obsolete or excessive inventory? Are you collecting your receivables on time?
  • Are you current on your payments and can you service your debt?
  • Are you charging enough for your products and services?
  • Are your costs in line with sales?
  • 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



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